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[Senate Hearing 107-1146]
[From the U.S. Government Publishing Office]

                                                       S. Hrg. 107-1146
 
      STATE OF THE TOURISM INDUSTRY ONE YEAR AFTER SEPTEMBER 11TH

=======================================================================

                                HEARING

                               before the

     SUBCOMMITTEE ON CONSUMER AFFAIRS, FOREIGN COMMERCE AND TOURISM

                                 OF THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 25, 2002

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation

                    U.S. GOVERNMENT PRINTING OFFICE
94-331                      WASHINGTON : 2006
_____________________________________________________________________________
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        SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

              ERNEST F. HOLLINGS, South Carolina, Chairman
DANIEL K. INOUYE, Hawaii             JOHN McCAIN, Arizona
JOHN D. ROCKEFELLER IV, West         TED STEVENS, Alaska
    Virginia                         CONRAD BURNS, Montana
JOHN F. KERRY, Massachusetts         TRENT LOTT, Mississippi
JOHN B. BREAUX, Louisiana            KAY BAILEY HUTCHISON, Texas
BYRON L. DORGAN, North Dakota        OLYMPIA J. SNOWE, Maine
RON WYDEN, Oregon                    SAM BROWNBACK, Kansas
MAX CLELAND, Georgia                 GORDON SMITH, Oregon
BARBARA BOXER, California            PETER G. FITZGERALD, Illinois
JOHN EDWARDS, North Carolina         JOHN ENSIGN, Nevada
JEAN CARNAHAN, Missouri              GEORGE ALLEN, Virginia
BILL NELSON, Florida
               Kevin D. Kayes, Democratic Staff Director
                  Moses Boyd, Democratic Chief Counsel
      Jeanne Bumpus, Republican Staff Director and General Counsel
                                 ------                                

          SUBCOMMITTEE ON CONSUMER AFFAIRS, FOREIGN COMMERCE 
                              AND TOURISM

                BYRON L. DORGAN, North Dakota, Chairman
JOHN D. ROCKEFELLER IV, West         PETER G. FITZGERALD, Illinois
    Virginia                         CONRAD BURNS, Montana
RON WYDEN, Oregon                    SAM BROWNBACK, Kansas
BARBARA BOXER, California            GORDON SMITH, Oregon
JOHN EDWARDS, North Carolina         JOHN ENSIGN, Nevada
JEAN CARNAHAN, Missouri              GEORGE ALLEN, Virginia
BILL NELSON, Florida

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on September 25, 2002...............................     1
Statement of Senator Carnahan....................................     2
Statement of Senator Dorgan......................................     1
Statement of Senator Fitzgerald..................................     7

                               Witnesses

Durst, Jr., John K., Executive Director, South Carolina 
  Department of Parks, Recreation and Tourism....................     4
    Prepared statement...........................................     6
Hentschel, Noel Irwin, Chairman and CEO of AmericanTours 
  International..................................................    37
    Prepared statement...........................................    40
Lounsberry, Fred, National Chair, Travel Industry Association of 
  America........................................................    32
    Prepared statement...........................................    34
McDowell, Ann, Chairwoman, Marketing Advisory Council of the 
  Branson/Lakes Area Chamber of Commerce.........................     8
    Prepared statement...........................................    10
Rosenbluth, Hal F., Chairman and CEO, Rosenbluth International...    13
    Prepared statement...........................................    14
Tisch, Jonathan, Chairman, Travel Business Roundtable............    21
    Prepared statement...........................................    24

                                Appendix

Wright, Samuel H., Senior Vice President, Government Relations, 
  Cendant Corporation, prepared statement........................    53

      STATE OF THE TOURISM INDUSTRY ONE YEAR AFTER SEPTEMBER 11TH

                              ----------                              

                     WEDNESDAY, SEPTEMBER 25, 2002

                               U.S. Senate,
Subcommittee on Consumer Affairs, Foreign Commerce 
                                       and Tourism,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:31 p.m. in 
room SR-253, Russell Senate Office Building, Hon. Byron L. 
Dorgan, Chairman of the Subcommittee, presiding.

          OPENING STATEMENT OF HON. BYRON L. DORGAN, 
                 U.S. SENATOR FROM NORTH DAKOTA

    Senator Dorgan. Good afternoon. We are holding another 
hearing slightly less than a year after the hearing we held 
last year in the aftermath of September 11th. In the wake of 
that tragedy, Congress acted quickly and responsibly to help 
the airline industry, since it had been shut down on September 
11th and remained down for some days. We helped the airline 
industry both in terms of financial assistance and new security 
measures so that the flying public would be confident that it 
is safe to fly.
    It is clear that the aviation industry is not the only 
sector of the economy that was deeply affected by September 
11th. This became evident in last years hearing in which we 
heard from executives and representatives of other portions of 
the travel and tourism industry. Much of that industry was 
deeply affected by September 11 and it continues to be affected 
in a significant way today.
    The travel and tourism industry is a significant part of 
our economy. It is the third largest retail industry, 
generating more than $582 billion in revenue each year and 
directly and indirectly employing more than 18 million people. 
No industry took a bigger hit after September 11th last year 
than travel and tourism. Yet, this industry received nothing to 
help stabilize it or help it recover after September 11.
    The taxpayers in this country, correctly in my judgment, 
extended $5 billion in grants and $10 billion in guaranteed 
loans to the airline industry to help it recover. I supported 
that assistance. I did not feel we had much choice. But no such 
help was offered to other parts of the travel and tourism 
industry which were devastated as a result of the terrorist 
attacks.
    Some in Congress, myself included, along with my colleague 
from Missouri and my colleague from Nevada, offered and 
proposed legislation to help the industry and workers recover. 
That legislation was not enacted.
    The purpose of this hearing, nearly a year later, is to 
examine how the industry is doing. This is an important 
question to ask. The tourism industry really has gone it alone 
for the last year. The freedom to travel is a basic freedom. It 
is a freedom that depends on having a network of successful 
hotels, travel agents, car rental companies, restaurants, 
airlines, and attractions to give us places to go, things to do 
and to take care of us as we travel and when we get to where we 
are going.
    Today we seek to understand the extent of the damage that 
was done to the tourism industry as a result of the terrorist 
attacks as well as the economy's response to those attacks. We 
want to understand what has happened to the people employed in 
the industry so we can evaluate what, if anything, needs to be 
done in public policy to respond to it. How is the industry 
doing?
    We know that international arrivals in the United States 
were down by 12 percent in the first quarter of this year, but 
what about American travelers? We know if the hotel employees 
and restaurant employees international union could be here 
today--they are not able to be here--they would tell us that 15 
percent of their members are still out of work. We know that 
the airlines are still suffering from fewer business passengers 
and hemorrhaging in red ink. So, are people traveling less? Is 
the hassle factor of going through airport security, 
encouraging people to travel by car? If that is the case, do 
these new travel patterns have implications for the rest of the 
industry?
    In the part of the country that I come from, we are well 
familiar with disasters. We know what it is like when, through 
no fault of your own, the world falls out from under you as a 
result of a natural disaster. But there was nothing natural 
about the cowardly and deadly acts of September 11th last year, 
and they were certainly unpredictable, unexpected, and clearly 
beyond the control of anyone who was affected by them.
    Just as our country has generously responded to natural 
disasters, now we must determine the best way to help our 
economy heal. The first step towards that end is understanding 
what has happened, what is the current status of this industry?
    We have invited a number of witnesses to join us today. We 
appreciate the fact that they have traveled here, and we are 
anxious to have a discussion and complete a record for our 
colleagues here in the Senate on the state of the tourism 
industry in this country today.
    We are joined by Senator Carnahan, and we will be joined by 
others on the Subcommittee later. Senator Carnahan, do you have 
a statement?

               STATEMENT OF HON. JEAN CARNAHAN, 
                   U.S. SENATOR FROM MISSOURI

    Senator Carnahan. Yes. Thank you, Mr. Chairman, for 
conducting this hearing today. I certainly appreciate your 
leadership on this Committee in this matter.
    Tourism is one of the most important industries in 
Missouri, a $7.8 billion a year industry. The industry employs 
nearly 191,000 people. Spending by travelers generates about 
$625 million a year in State taxes and $272 million in local 
taxes. The importance of the tourism industry in my State has a 
lot to do with the diversity that Missouri has to offer. From 
the Gateway Arch in St. Louis to the traditions of jazz and 
blues and barbecue in Kansas City, Missouri is rich in history 
and culture.
    In fact, one of the most dynamic tourism destinations in 
the Nation is located in my State. In February 2002, Byways 
magazine named Branson, Missouri the top motor coach 
destination during the entire decade. The National Tour 
Association and Group Leaders of America ranked Branson as the 
number 10 most popular overall tourist destination in the 
country, and Family Fun magazine named Branson the top family-
friendly tourist town in the midwest. Branson is considered the 
live music show capital of the world. It is home to 49 music 
theaters with a total theater seating capacity of 61,714 seats. 
That is more seats than are available on Broadway in New York.
    Mr. Chairman, I am extremely pleased that we have a 
resident of Branson here to testify before this Committee 
today. Ann McDowell is the co-owner and general manager of Ride 
the Ducks in Branson which was recently named the Small 
Business of the Year in the Branson/Lakes Area. She is also the 
chairwoman of the Marketing Advisory Council of the Branson 
Chamber of Commerce. I am grateful for her willingness to take 
time out of her busy schedule share her insights with the 
Committee today, particularly the impact that September 11th 
has had on tourism.
    Thank you again, Mr. Chairman, for holding this hearing and 
for exploring this timely topic.
    Senator Dorgan. Senator Carnahan, thank you very much. I 
would have been disappointed, after that description of 
Branson, had we not had someone on the panel from Branson.
    [Laughter.]
    Senator Dorgan. I was in the State of Missouri with Senator 
Carnahan last Friday, and I guess I was not so much aware of 
the barbecue sauce in Kansas City, but I escaped without 
having----
    Senator Carnahan. Well, I regret we did not share that with 
you.
    Senator Dorgan. Perhaps we can remedy that at some point.
    Let me thank you for your comments and say that we have an 
interesting panel of witnesses. We have Mr. John Durst, 
Executive Director of the South Carolina Department of Parks, 
Recreation and Tourism; Ms. Ann McDowell, Chairwoman, Marketing 
Advisory Council of the Branson/Lakes Area Chamber of Commerce; 
Mr. Hal Rosenbluth, President and CEO of Rosenbluth 
International; Mr. Jonathan Tisch, Chairman of the Travel 
Business Roundtable; Mr. Fred Lounsberry, National Chair of the 
Tourism Industry Association of America; and Ms. Noel 
Hentschel, Chairwoman and CEO, AmericanTours International.
    Let us begin with Mr. Durst. Mr. Durst is Executive 
Director of the South Carolina Department of Parks, Recreation 
and Tourism. He will talk to us about the South Carolina 
tourism industry and initiatives from the Southern Governors 
Association. Mr. Durst, we thank you very much for being with 
us. Why don't you proceed, and then when you are finished, I am 
going to call on the ranking member, Senator Fitzgerald, for a 
statement.

  STATEMENT OF JOHN K. DURST, JR., EXECUTIVE DIRECTOR, SOUTH 
      CAROLINA DEPARTMENT OF PARKS, RECREATION AND TOURISM

    Mr. Durst. Thank you, Mr. Chairman, and good afternoon to 
you and also the other distinguished Members of the 
Subcommittee.
    My name is John Durst. I have the honor of appearing before 
you today representing South Carolina Governor Jim Hodges, our 
State's tourism industry, and the South Carolina Department of 
Parks, Recreation and Tourism. I serve as the Director of PRT. 
It is my great honor to testify on the topic of South 
Carolina's tourism industry in the aftermath of September 11.
    The past 12 months have been a time of testing and 
challenge for South Carolina's tourism industry, just as it has 
been for our sister States. South Carolina, a State known for 
its southern hospitality, its smiling faces, and its beautiful 
places, has proven to be resilient, and today I would like to 
share with you how our tourism industry, the Governor, the 
legislature, and the people in our great State have worked in 
partnership to achieve a remarkable recovery.
    Travel and tourism has become South Carolina's number one 
industry. It employs nearly 13 percent of our work force, 
generates over three-quarters of a billion dollars in State and 
local taxes, and represents 8.8 percent of our gross State 
product. In fact, in most southern States, tourism ranks among 
the top three industries.
    As we all know, even before the tragic events of September 
11th, the effects of a slowing national and global economy were 
having a negative impact on every State's revenue stream. 
Tourism, however, had remained stronger than many other sectors 
of the economy. Unfortunately, the terrorist attacks sent our 
tourism industry, along with that of our sister States, into a 
tailspin and with it the economy of most southern States.
    We in South Carolina recognized the economic importance of 
travel and tourism to our State. So in the aftermath of 
September 11th, we aggressively moved forward to proactively 
address these unprecedented challenges. Within a month of 
September 11, Governor Hodges convened a summit on tourism and 
travel to gain input from tourism industry leaders from across 
our State. That summit led to our developing a 10-point plan 
for recovery and our forming a special tourism resilience 
committee to implement the summit's recommendations.
    Later that same month, in response to a request from 
Governor Hodges and with bipartisan support from our 
legislature, our State Budget and Control Board provided a $2 
million emergency loan to our agency for the immediate 
development of an aggressive tourism marketing and promotion 
program. My agency then leveraged these funds with dollars from 
our private sector partners to further extend the reach and 
frequency of our marketing at a critical moment. I want to 
commend those partners for their invaluable support which was 
nothing short of economic patriotism.
    The results of these strategic actions and the partnerships 
forged between State government and our private sector partners 
were both immediate and dramatic. In the past 12 months, almost 
every measurable segment of South Carolina's tourism industry 
has, comparatively speaking, shown strong recovery. We have 
realized a return on the marketing dollars invested in that 
emergency program of about 20 to 1 and our general assembly 
forgave the $2 million loan.
    I would be remiss if I did not note that our State has 
always been a major drive destination for leisure travelers. We 
are not as dependent as many of our sister States on air 
transportation to maintain our industry's economic health and 
well-being, nor are we as dependent upon the business traveler 
or conventions and meetings, though they are an increasingly 
significant segment of our tourism economy.
    We are, however, extremely cognizant of the fact that the 
travel industry's overall health is dependent upon the 
continued strength of our sister States' tourism industries. We 
are all interrelated and we are all interdependent.
    Having said that, it should be noted that continued State 
revenue State revenue shortfalls are having major negative 
impacts on our ability to market and therefore sustain our 
tourism industry's momentum, limiting our ability to generate 
much-needed revenue for our State. At the very time we need to 
generate revenue the most, our efforts are being impaired due 
to State agency budget reductions arising from continued 
revenue shortfalls.
    It is with this in mind that we respectfully believe that a 
strong tourism partnership, based on the successful 
partnerships we have developed between our State and our 
private sector partners, must be forged between the Federal 
Government and the States in order to move this vital industry 
forward significantly.
    I would like to suggest, Mr. Chairman, two arenas in which 
this partnership can have a major and measurable impact that 
involve both the domestic and international travel sectors.
    First, State tourism development of international markets 
is dependent upon reliable data to guide our strategic 
planning. The current in-flight surveys of international 
travelers has been so underfunded that it provides insufficient 
sample size for any reliable analysis. The success of this 
program relies on sufficient, recurring funding for the surveys 
and voluntary cooperation by the airlines in helping to 
administer the surveys which are distributed during flights. We 
respectfully submit that it is imperative that sufficient 
funding be provided to the Office of Tourism Industries in the 
U.S. Department of Commerce on a consistent basis to better 
assist individual States and regions in international 
marketing.
    Second and final, we would further respectfully submit that 
it is in both our interests, State and Federal, to forge a 
cooperative partnership that helps leverage existing State 
government expenditures for travel and tourism advertising and 
assist with marketing efforts to regain and retain traveler 
confidence. To this end, we would urge you to support 
legislation similar to that introduced late last year to grant 
Federal funds to States based on tourism advertising dollars 
expended.
    Gentlemen, lady, a strong national travel industry is vital 
for the economic health of our States and our Nation. Forging 
and funding a partnership between the Federal Government, the 
States, and our thousands of industry partners can help ensure 
its strength and thereby benefit all Americans.
    Mr. Chairman, thank you again for the opportunity to 
discuss this important issue with you and the other Members of 
the Committee.
    [The prepared statement of Mr. Durst follows:]

  Prepared Statement of John K. Durst, Jr., Executive Director, South 
          Carolina Department of Parks, Recreation and Tourism
    Good Afternoon Mr. Chairman and Members of the Committee.
    My name is John Durst. I have the honor of appearing before you 
today representing South Carolina, Governor Jim Hodges, our state's 
tourism industry and the South Carolina Department of Parks, Recreation 
and Tourism. I serve as the Director. It is my great honor to testify 
on the topic of South Carolina's tourism industry in the aftermath of 
September 11.
    The past twelve months have been a time of testing and challenge 
for South Carolina's tourism industry; just as it has been for our 
sister states. South Carolina--the State known for its southern 
hospitality, its Smiling Faces and its Beautiful Places has proven to 
be resilient. And today I'd like to share with you how the tourism 
industry, the Governor, the legislature and the people of our state 
have worked in partnership to achieve a remarkable recovery.
    Travel and Tourism has become South Carolina's number one industry. 
It employs nearly 13 percent of our workforce and generates over three 
quarters of a billion dollars in state and local taxes. In fact, the 
tourism economy in South Carolina represents 8.8 percent of our Gross 
State Product. In most southern states, for instance, tourism ranks 
among the top three industries.
    As we all know, even before the tragic events of September 11, the 
effects of a slowing national and global economy were having a negative 
impact on every state's revenue stream. Tourism, however, had remained 
stronger than many other sectors of the economy. Unfortunately, the 
terrorist attacks sent our tourism industry and that of our sister 
states, into a tailspin, and with it, the economies of most southern 
states.
    We in South Carolina recognized the economic importance of Travel 
and Tourism to our State. So, in the aftermath of September 11 we 
aggressively moved forward to proactively address the unprecedented 
challenges. Within a month of September 11, Governor Hodges convened a 
Summit on Tourism and Travel to gain input from tourism industry 
leaders from across our state. This summit led to our developing a 10-
point plan for recovery and our forming a special Tourism Resilience 
Committee to implement the summit's recommendations. Later that same 
month (October of 2001), in response to a request from Governor Hodges, 
and with bi-partisan support from our legislature, our state Budget and 
Control Board provided a $2 million emergency loan to our agency for 
the immediate development of an aggressive tourism marketing and 
promotion program. My agency then leveraged these funds with dollars 
from our private sector partners to further extend the reach and 
frequency of our marketing at a critical moment. I want to commend 
those partners for their invaluable support, which was nothing short of 
economic patriotism.
    The results of these strategic actions and the partnerships forged 
between state government and our private sector partners were both 
immediate and dramatic. In the past twelve months, almost every 
measurable segment of South Carolina's tourism industry has, 
comparatively speaking, shown strong recovery.
    We have realized a return on the marketing dollars invested in this 
emergency program of about 20 to 1. And our General Assembly forgave 
the $2 million loan.
    I would be remiss if I did not note that our state has always been 
a major drive destination for leisure travelers. We are not as 
dependent, as many of our sister states on air transportation to 
maintain our industry's economic health and well being. Nor are we as 
dependent upon the business traveler or conventions and meetings, 
though they are an increasingly significant segment of our tourism 
economy. We are, however, extremely cognizant that the travel 
industry's overall health is dependent upon the continued strength of 
our sister state's tourism industries--for we are all interrelated and 
interdependent.
    Having said that, it should be noted that continued state revenue 
shortfalls are having major negative impacts on our ability to market, 
and therefore sustain, our tourism industry's momentum, limiting our 
ability to generate much-needed revenue for our State. At the very time 
we need to generate revenue the most, our efforts are impaired due to 
state agency budget reductions arising from continued revenue 
shortfalls.
    It is with this in mind that we respectfully believe that a strong 
tourism partnership--based on the successful partnerships we have 
developed between our state and our private sector partners--must be 
forged between the Federal Government and the states, in order to move 
this vital industry significantly forward significantly.
    I would like to suggest two arenas in which this partnership can 
have a major and measurable impact involve both the domestic and 
international travel sectors.
    First, state tourism development of international markets is 
dependent upon reliable data to guide our strategic planning. The 
current ``In-flight Surveys'' of international travelers has been so 
under-funded that it provides insufficient sample size for any reliable 
analysis. The success of this program relies on sufficient, recurring 
funding for the surveys and voluntary cooperation by the airlines in 
helping to administer the surveys, which are distributed during 
flights. We respectfully submit that is imperative that sufficient 
funding be provided to the Office of Tourism Industries in the U.S. 
Department of Commerce, on a consistent basis, to better assist 
individual states and regions in international marketing.
    Secondly, we would further respectfully submit that it is in both 
our interests, federal and state, to forge a cooperative partnership 
that helps leverage existing state government expenditures for travel 
and tourism advertising and assists with marketing efforts to regain 
and retain traveler confidence. To this end, we would urge you to 
support legislation similar to that introduced late last year to grant 
federal funds to states based on tourism advertising dollars expended.
    Gentlemen (and Ladies), a strong, national travel industry is vital 
for the economic health of our states and our nation. Forging and 
funding a partnership between the Federal Government, the states, and 
our thousands of industry partners can help ensure its strength and 
thereby benefit all Americans.
    Mr. Chairman, thank you again for this opportunity to address you 
and the other distinguished Members of this Committee.

    Senator Dorgan. Mr. Durst, thank you very much.
    Let me call on the ranking Member of the Subcommittee, 
Senator Fitzgerald from Illinois.

            STATEMENT OF HON. PETER G. FITZGERALD, 
                   U.S. SENATOR FROM ILLINOIS

    Senator Fitzgerald. Thank you, Senator Dorgan, and I am 
glad that you are holding this hearing because I think it is 
important that we hear from more than just the airlines in the 
travel and hospitality industry. I am concerned that too much 
of the focus on Capitol Hill has been on how can we get our 
checkbooks and write more checks to the airlines. Last year we 
provided them with $15 billion in relief. If you add that to 
the roughly $15 billion we also spent last year on security and 
airport improvements, it really piles up to about $30 billion 
that were given to the airlines. But I think that the tourism 
and hospitality industry consists of a lot more than airlines. 
I am glad to see travel agencies represented here, as well as 
hotels, tour bus companies, and a broad cross section of the 
tourism and travel industry.
    I would like to hear your ideas on what you think we can do 
to keep tourism going in America. As you may have heard, the 
airlines are back asking for more money, and they have an awful 
lot of clout on Capitol Hill. Last year they got a lot of 
money, and everybody else was left twisting in the wind. I will 
be interested to hear your perspective on the possible specter 
of Congress doing the same thing all over again, with you guys 
being left out. I hope you will be more aggressive this year in 
not letting Congress forget about the rest of the hospitality 
and tourism industry.
    So, thank you all for being here, and we will look forward 
to asking you questions.
    Senator Dorgan. Senator Fitzgerald, thank you very much.
    Next we will hear from Ms. Ann McDowell, Chairwoman, 
Marketing Advisory Council of the Branson/Lakes Area Chamber of 
Commerce. Ms. McDowell will tell us about the Branson, Missouri 
tourism market one year after September 11 and the health of 
the Missouri tourism issue in general. So, Ms. McDowell, thank 
you for being with us.

   STATEMENT OF ANN McDOWELL, CHAIRWOMAN, MARKETING ADVISORY 
               COUNCIL OF THE BRANSON/LAKES AREA 
                      CHAMBER OF COMMERCE

    Ms. McDowell. Thank you, Mr. Chairman. It is my honor to be 
here to represent Branson, Missouri.
    The tragedies of September 11th created an immediate impact 
in Branson, Missouri, similar to other tourism destinations 
throughout the United States. While we are no longer reeling 
from the impact, there is a lingering uncertainty about our 
economic future. As you might suspect in a city of less than 
5,000 residents, a city that hosts 7 million visitors annually, 
the people of our community are significantly dependent on 
tourism for our economic well-being.
    Senator Dorgan. Ms. McDowell, would you tell us where 
Branson is?
    Ms. McDowell. I will. It is the southwest corner of the 
State of Missouri. We are about a 3-hour drive from St. Louis 
or from Kansas City.
    To understand the impact of this incident on Branson, it 
would be important to know a little bit about how Branson 
became a tourism mecca. Located in the Ozark Mountains in an 
area too rugged for farming and too remote for other industrial 
development, Branson developed a tourism industry in the early 
1900's. Lakes, mountain scenery, and the simple lifestyle of 
the Ozarks described in a popular novel of the time entitled 
The Shepherd of the Hills drew early visitors. Float trips, 
fishing, and water activities sustained the tourism industry 
until the 1960's when several major tourism developments were 
formed. A theme park called Silver Dollar City helped to make 
Branson a regional tourism destination.
    In the mid-1980's, celebrity entertainers who had been 
occasional featured guests in music shows in Branson began to 
move into the community and perform full time. By the early 
1990's, Branson was a household name across America, famous for 
live music shows and family entertainment, largely because of 
some exposure we received in 1991 on the 60 Minutes program.
    It is difficult for any tourism destination to provide a 
definitive answer as to why people come, and certainly no 
single event or incident can be blamed or credited with a 
destination's year-end results. It is always a combination of 
factors that result in success or disappointment in ours, or 
probably any industry. However, for the first time in over 20 
years, Branson experienced a decline in visitation during 2001. 
Year-end numbers indicated a decrease of approximately 3 
percent.
    While Branson has certainly felt an impact since September 
11th, it has suffered less than other national tourism 
destinations. We believe this is because of where we are 
located and what we are.
    Branson, Missouri is located, as I mentioned, in the 
southwest corner of our midwestern State within a day's drive 
of about half the Nation's population. About 7 million each 
year visit Branson and over 90 percent of them drive to Branson 
in their automobiles.
    Understanding where Branson is located relative to our 
Nation's population and the heavy propensity for drive-in 
traffic explains some of our resilience to this tourism crisis, 
but equally important is the significance of what Branson is 
really all about.
    Branson's core values of celebrating the American spirit 
and patriotism, its long-time appreciation for military 
veterans, and its faith-based, family-friendly environment have 
given it broad appeal for many years. The community's 
commitment to these values was established 50 years ago and 
supported continuously throughout our development. Visitors 
know these values are not just a marketing ploy by Branson but 
rather an intrinsic part of the culture and lifestyle of our 
area.
    American Demographics published a major study in its 
September 2002 magazine that examined consumer behaviors, 
including travel habits, relative to September 11. In October 
of 2001, 12 percent of Americans with young children said they 
planned to take a family vacation in response to the attacks on 
September 11th. By June of 2002, almost twice as many, 20 
percent, said they had, indeed, taken a vacation with their 
loved ones. There is also a change in the way people are 
spending their dollars. Overall, only 12 percent of those 
surveyed said they are spending more for vacations than they 
did prior to September 11th.
    The increased number of leisure family travelers has helped 
to buoy Branson. Because our area is perceived as a value 
destination as well, a flat or decreased spending pattern by 
vacationers, coupled with a softening national economy, may 
well make Branson an even more appealing travel destination.
    During the first quarter of 2002, tourism taxes collected 
in our area indicate Branson travel was up more than 10 percent 
over the first quarter of 2001. Now, although those results are 
promising, it is important to understand that the first quarter 
of Branson's business is really our off-season and represents a 
very small portion of our total economic picture. A more 
realistic look is probably our 2002 year-to-date room demand 
through July that shows a 2.9 percent increase over the prior 
year. We feel extremely fortunate to show any discernible 
increase during these lean and turbulent times for tourism.
    Branson rebounded quickly but not without considerable and 
ongoing effort. Everyone in Branson is working harder and 
reaching further for new ideas to maintain our economic 
stability.
    In summary, in the aftermath of September 11th, Branson has 
been more fortunate than most tourism destinations. While we 
have not suffered great losses, we also have not enjoyed our 
traditional or expected growth. Our best explanation is that 
our resiliency is the result of where we are and what we 
represent. Branson's location in the heart of America is 
accessible for many by car who may be reluctant to fly. For the 
growing numbers of people in search of a great vacation value 
and a destination closer to home, Branson is an appealing 
alternative. Branson represents the wholesome family values, 
patriotism, and faith-based foundation that comfort Americans 
in times of crisis. We provide a safe haven of traditional 
family values in a world that is suddenly more uncertain than 
ever before.
    Coincidentally, our advertising message for 2002 was a 
remake of a marketing effort for our community that was 
originally developed in 1994. So, by no means was this a new 
branding or positioning effort on our part, but it was a 
message clearly more meaningful than ever before. It's title 
was Rediscover America, and it said: ``This year visit a place 
in the heart of America. A place where you can sit outside and 
look at the stars, or come inside and do the same thing. A 
place where getting `high' means a roller coaster ride or a 
walk on an Ozark mountain top. A place of spectacular sights, 
and smiles on faces you love. Where family values and the 
American spirit endure. It's called Branson, Missouri. And it's 
for everyone who wants to rediscover America.'' For those 
reasons, Branson has a positive message to report today.
    Thank you.
    [The prepared statement of Ms. McDowell follows:]

  Prepared Statement of Ann McDowell, Chairwoman, Marketing Advisory 
         Council of the Branson/Lakes Area Chamber of Commerce

                                SUMMARY

Branson, Missouri
    Located in the Southwest corner of Missouri, Branson's population 
is less than 5,000 yet it attracts nearly seven million leisure 
visitors annually. Travelers of all ages come to experience the natural 
beauty of the Ozark hills and lakes as well as an immense and diverse 
selection of music shows, theme parks and other wholesome, family-
friendly attractions.

Branson/Lakes Area Chamber of Commerce and Convention & Visitors 
        Bureau
    Over 900 business members strong, the Branson/Lakes Area Chamber of 
Commerce fulfills its mission to enhance the economic health of the 
Branson/Lakes Area. Our vision is to lead the Branson/Lakes Area in 
becoming one of the most recognized in America for quality of life, 
business and vacations. The activities of this organization are 
implemented by four separate councils addressing membership/funding, 
marketing, small business and tourism development.

Marketing Advisory Council
    The Marketing Advisory Council of the Branson/Lakes Area Chamber of 
Commerce is responsible for all marketing efforts designed to attract 
visitors to the area. The dollars expended for these efforts, $4-5 
million annually, are generated from memberships, donations, fund 
raising efforts and a citywide tourism tax on area lodging, theaters 
and attractions.

Ann McDowell, Witness
    McDowell is an elected member of the Board of Directors for the 
Branson/Lakes Area Chamber of Commerce and currently serves as the 
Chairman of the Marketing Advisory Council. She has 18 years of 
experience in travel and tourism marketing. For the past eight years 
Ann has worked with her husband Bob in their own Branson-based 
business, Ride The Ducks International, LLC. The company remanufactures 
amphibious vehicles and carries in excess of 300,000 passengers 
annually on land and water sightseeing tours in Branson, MO and in 
Baltimore, MD (as Discovery Channel Ducks.) Their vehicles are also in 
use in Boston, MA and Seattle, WA with plans to expand to additional 
markets in the near future.

The Impact Of September 11 Attacks On Branson, Missouri
    While no single event can be blamed with a tourism destination's 
results, Branson visitation showed a year-end decline of 2.9 percent in 
2001, for the first time in 20 years. Our area has been more fortunate 
than most in terms of a 2002 rebound. Our year-to-date room demand is 
up 3.9 percent through July 2002 and many other economic signs are 
positive for our community that is significantly dependent on tourism. 
Our belief is that our Midwestern, small town location, as well as the 
predominance of visitors who drive to our destination, as opposed to 
flying, have been positive attributes under these particular 
circumstances. In addition, our history of overt patriotism, genuine 
hospitality, and family values seem to be in perfect alignment with the 
current mood of our nation and disposition of the traveling public.

                               TESTIMONY

    The tragedies of September 11, 2001 created an immediate impact in 
our vital tourism community of Branson, Missouri, in the same way it 
did other tourism destinations and other small towns throughout the 
United States. While we are no longer reeling from the impact, we feel 
a lingering uncertainty about our economic future. As you might suspect 
in a community of less than 5,000 residents, that hosts 7 million 
visitors annually, the people of Branson are significantly dependent on 
tourism for our economic well-being.

Branson History
    To understand the impact of this incident on Branson, you should 
know a little about how Branson became a tourism phenomenon. Located in 
the Ozark Mountains in an area too rugged for farming and too remote 
for other industrial development, Branson began to develop a tourism 
industry in the early 1900s. Lakes, mountain scenery and the simple 
lifestyle of the Ozarks as described in a popular novel, ``The Shepherd 
of the Hills,'' drew early visitors. Float trips, fishing and water 
activities sustained the tourism industry until the late 1950s and 
early 1960s, when several major developments including the theme park 
Silver Dollar City, made Branson a regional tourism destination. In the 
mid-1980s, celebrity entertainers who had been occasional guests in 
family owned music theaters began to move into the community. By the 
early 1990s, Branson was a household name across America, famous as a 
live music show and entertainment destination. Andy Williams, the 
Osmond Family, Mickey Gilley, Moe Bandy, Jim Stafford, Bobby Vinton, 
Mel Tillis, Yakov Smirnoff, Sons of the Pioneers and many others 
currently call Branson their performing ``home.''
2001 Year End Results
    No tourism destination can provide a definitive answer to why 
people come. And certainly no single event or incident can be blamed or 
credited with a tourism destination's year-end results. It is always a 
combination of factors that result in success or disappointment in the 
tourism industry. However for the first time in over twenty years, 
Branson experienced a decline in visitation during 2001. Year-end 
numbers indicated a decrease of approximately 2.9 percent.

Impact On Branson Less Severe
    While Branson has certainly felt an impact since September 11, it 
has suffered less than other national tourism destinations. We believe 
this is because of where it is, and what it is.
    Branson Missouri is located in the Southwest corner of our state, 
within a day's drive of about half the nation's population. About seven 
million people visit Branson each year, and 96 percent of them drive to 
Branson in their automobiles.
    Across the nation, urban destinations were impacted more severely 
than drive-to destinations. Losses immediately following the attacks 
were greatest among the northwest and south regions, to businesses 
catering primarily to international visitors and airlines, tour 
operators and travel agencies, according to the Travel Industry 
Association of America (TIA). Losses were least among rural areas, the 
western region, and businesses serving primarily the domestic market. 
As vacationers shifted from air travel to auto travel following the 
attacks, stable gas prices, a shift to closer-to-home travel and 
growing interest in family travel helped to support the drive-to 
destinations, like Branson.
    Understanding where Branson is located relative to our nation's 
population, and the heavy propensity for drive-in traffic explains some 
of our resilience to this tourism crisis. But and equally important 
element is the significance of what Branson is.
    Branson's core values of celebrating the American spirit and 
patriotism, its longtime reputation of appreciation for military 
veterans, and its faith-based environment have given it a broad appeal. 
The TIA shows a shift in core consumer values to focus on the following 
related qualities: family, community, integrity, balance, authenticity 
and security.
    The community's commitment to those values was established a half-
century or more ago and supported continuously through its development. 
Visitors know these values are not just a marketing ploy but rather an 
intrinsic part of the culture and lifestyle of Branson.
    American Demographics published a major study in its September 2002 
magazine that examined consumer behaviors, including travel habits, in 
light of the 9-11 attacks. In October 2001, 12 percent of Americans 
with young children (up to age 11) said they planned to take a family 
vacation in response to the attacks on September 11. By June 2002, 
almost twice as many (20 percent) said they had taken such a vacation 
with their loved ones. There is also a change in the way people are 
spending their dollars. Overall 12 percent of those surveyed said they 
are spending more for vacations than they did prior to September 11. 
The increased number of travelers has helped to buoy Branson. Because 
our area is perceived as a value destination, decreased spending on 
vacations coupled with a softening national economy may well make 
Branson an even more appealing travel destination.

2002 Results So Far
    During the first quarter of 2002, tourism taxes collected indicate 
Branson travel was up more than 10 percent over the first quarter of 
2001. Although these results are promising, it is important to 
understand that the first quarter is Branson's ``off-season'' 
representing a very small portion of the total economic market, where 
small changes can generate significant percentage growth numbers. A 
more realistic look is probably our 2002 year-to-date room demand 
through July that shows a 2.9 percent increase over the prior year. 
Still we feel very fortunate to show even minor increases in these lean 
and turbulent times for tourism.
    Branson rebounded quickly after the immediate effects of September 
11, but not without considerable and ongoing effort. Everyone in 
Branson is working harder than ever and reaching further than ever 
before, for new ideas to maintain economic stability.

Summary
    In summary, in the aftermath of September 11, Branson has been more 
fortunate than most tourism destinations because of where we are and 
what we represent. While we have not suffered great losses, we also 
haven't seen our traditional and expected growth. To stay level with 
last year's numbers, we are working much harder.

   Where we are. Branson's location in the heart of America is 
        accessible for many by car, who may be reluctant to drive. For 
        the growing numbers of people in search of a great vacation 
        value and a destination closer to home, Branson is an appealing 
        alternative.

   What we are. Branson represents the wholesome family values, 
        patriotism and faith-based respect that comfort Americans in 
        times of crisis. It's a comfortable, safe haven of traditional 
        family values in a world that is suddenly more uncertain than 
        ever before.

    Coincidentally our advertising message for 2002, was a remake of a 
marketing effort for our community originally created in 1994, so it 
was by no means a new branding or positioning of our destination, but 
it was a message clearly more meaningful than ever before. It said . . .

        ``This year visit a place in the heart of America. A place 
        where you can sit outside and look at the stars, or come inside 
        and do the same thing. A place where getting ``high'' means a 
        roller coaster ride or a walk on an Ozark mountain top. A place 
        of spectacular sights, and smiles on faces you love. Where 
        family values and the American spirit endure. It's call 
        Branson, Missouri. And it's for everyone who wants to 
        rediscover America.''

    Senator Dorgan. Ms. McDowell, thank you very much.
    Next we will hear from Hal Rosenbluth, President and CEO of 
Rosenbluth International. Hal's company is truly an 
international company, but we are also very pleased and proud 
that his company has a significant presence in our State. So, 
Hal Rosenbluth, why do you not proceed. Thank you for being 
here.

 STATEMENT OF HAL F. ROSENBLUTH, CHAIRMAN AND CEO, ROSENBLUTH 
                         INTERNATIONAL

    Mr. Rosenbluth. Thank you, Mr. Chairman, Members of 
Committee on Commerce, Science, and Transportation. I am 
pleased to have the opportunity to speak with you today about 
the current state of the travel industry one year after the 
attacks of September 11th, 2001. I offer this testimony not 
only to provide statistics demonstrating the economic 
challenges faced by the industry during this past year, but 
also to leave you with my plan for industry recovery. Please 
note that the statistics and information provided in this 
testimony are not reflective of Rosenbluth International, but 
rather an overview of travel companies as a whole.
    The past 12 months have been among the most dramatic in the 
history of the travel industry. In my testimony before you last 
year, I discussed the tremendous loss of travel agency revenues 
in the days immediately following the attacks of September 
11th. One year later travel agencies are still struggling to 
recuperate, which is demonstrated by the following statistics 
released just this past September 12th by the Airline Reporting 
Corporation.
    In the past year alone, 11.3 percent of all agency 
locations have closed. This translates to a closing of 3,274 
travel offices.
    Also in this past year, 12.9 percent, almost 13 percent, of 
all agency firms have closed. This percentage translates into 
the closing of over 2,260 travel agency businesses, all of them 
family businesses.
    Total airline sales have decreased by 17 percent during 
this past year, for a loss of $9 billion in sales.
    In this past month of August, 104 agencies defaulted on 
their payments to airlines for tickets issued on their behalf, 
which is nearly twice that of last August.
    A survey of 200 corporate travel managers conducted from 
August 29th to September 5th by the National Business Travel 
Association determined that corporate travel is still below 
normal one year after September 11th, 2001.
    Seventy percent of these travel mangers responded that 
their travel in their companies is down from this time last 
year by as much as 20 percent.
    Seventy-two percent of the travel managers said that their 
travel was below 2000 levels, which is the last time travel was 
considered normal. I am not sure there is any normal anymore 
and they need to change the definition of normal in the 
dictionary. In fact, 31 percent of respondents said that travel 
was down by 20 percent of more since the year 2000.
    Sixty-two percent of these same travel managers think the 
recovery will take at least another 12 months. I certainly 
agree.
    In addition, 45 percent of the travel managers referred to 
the need for airline price reform in order for business travel 
to return to normal levels.
    From these statistics, it is clear that something concrete 
and immediate needs to occur in order for the travel and 
tourism industries to recover. It is no secret that most major 
airlines are in a state of financial crisis. In addition, the 
turbulent atmosphere of the U.S. economy and the prospect of 
war with Iraq can only hinder the improvement of our industry. 
Despite a slight increase in positive sentiment toward travel 
at the beginning of 2001, the Travel Industry Association of 
America's latest Traveler Sentiment Index shows a decline in 
the third quarter of 2002. The drop is mainly due to consumer 
concerns about not having enough money to travel due to the 
current sate of the economy.
    That same association also stated that with the economy 
recovering slower than expected, business travel is faring even 
worse than leisure travel and that dropped nearly 9 percent for 
January through June of 2002 as compared to the same time frame 
a year earlier.
    It is imperative that we act quickly and effectively to 
enable a return to a prosperous travel industry. In conjunction 
with my testimony, I have submitted A Fare Plan for Airline 
Recovery, which maps out both short- and long-term plans for 
the rejuvenation of the airline industry, which is critical to 
both strong travel agency recovery and commerce as a whole in 
the United States.
    We estimate that our Fare Plan will result in an additional 
$5 billion of annual revenue for the airlines, more passengers 
flying at fair prices, and companies better able to leverage 
their dollars while having a credible airline system necessary 
to conduct business. None of that requires any Government 
action whatsoever.
    The second part of the plan for airline and travel industry 
recovery introduces a reconstructed and new distribution model.
    It is a complex and rather arcane subject, so I have 
submitted in writing this plan in its entirety. I will, 
however, be happy to answer questions you might have relative 
to the white paper later in the session.
    A healthy airline industry, through the realignment of 
faring and distribution, in addition to cost-cutting measures 
now taking place, should result in the return to a strong 
travel industry and the resultant positive effects on commerce.
    Thank you very much.
    [The prepared statement of Mr. Rosenbluth follows:]

 Prepared Statement of Hal F. Rosenbluth, Chairman and CEO, Rosenbluth 
                             International

    Mr. Chairman and Members of the Committee on Commerce, Science and 
Transportation, my name is Hal F. Rosenbluth, Chairman and CEO of 
Rosenbluth International. I am pleased to have the opportunity to speak 
with you today about the current state of the travel industry, one year 
after the terrorist attacks of September 11, 2001. I offer this 
testimony not only to provide statistics demonstrating the economic 
challenges faced by the industry during this last year, but also to 
leave you with my plan for industry recovery. Please note that the 
statistics and information provided in this testimony are not 
reflective of Rosenbluth International, but rather an overview of 
travel companies as a whole.
    The past 12 months have been among the most dramatic in the history 
of the travel industry. In my testimony last year, I discussed the 
tremendous loss of travel agency revenue in the days immediately 
following the terrorist attacks of September 11, 2001.
    One year later, travel agencies are still struggling to recuperate, 
which is demonstrated by the following statistics released on September 
12, 2002 by the Airline Reporting Corporation (ARC):

   In the past year alone, 11.3 percent of all agency locations 
        have closed. This translates to the closing of 3,274 travel 
        offices.

   Also in the past year, 12.9 percent of all agency firms have 
        closed. This percentage translates to the closing of 2,260 
        travel agency businesses.

   Total airline sales have decreased by 17 percent during the 
        past year, a nearly $9 billion loss in sales.

   In August 2002, 104 agencies defaulted on their payments to 
        airlines for tickets issued on their behalf, which is nearly 
        twice that of last August.

    A survey of 200 corporate Travel Managers, conducted from August 29 
to September 5, 2002 by the National Business Travel Association 
(NBTA), determined that corporate travel is still below normal one year 
after September 11, 2001:

   70 percent of Travel Managers responded that travel in their 
        companies is down from this time last year by as much as 20 
        percent.

   72 percent of Travel Managers said their travel was below 
        2000 levels, which is the last time travel was considered 
        normal. In fact, 31 percent of respondents said their travel 
        was down by 20 percent or more from 2000.

    In addition, most Travel Managers see business travel recovery 
coming slower than previously expected:

   62 percent of Travel Managers think that recovery will take 
        more than 12 months.

   In addition, 45 percent of Travel Managers referred to the 
        need for airline price reform in order for business travel to 
        return to normal levels.

    From these statistics, it is clear that something concrete and 
immediate needs to occur in order for the travel and tourism industries 
to recover. It is no secret that most major American airlines are in a 
state of financial crisis. In addition, the turbulent atmosphere of the 
U.S. economy and the prospect of war with Iraq can only hinder the 
improvement of our industry. Despite a slight increase in positive 
sentiment toward travel at the beginning of 2001, the Travel Industry 
Association of America's (TIA) latest Traveler Sentiment Index (TSI) 
shows a decline in the third quarter of 2002. The drop is mainly due to 
consumer concerns about not having enough money to travel due to the 
current state of the economy. The overall index fell 5.5 percent to 
98.1 in third quarter 2002, which is within 1 percent of the index 
during third quarter 2001.
    TIA also stated that with the economy recovering slower than 
expected, business travel is faring even worse than leisure travel, 
dropping nearly 9 percent for January through June 2002, as compared to 
the same timeframe last year.
    It is imperative that we act quickly and effectively to enable the 
return to a prosperous travel industry. In conjunction with my 
testimony, I have submitted ``A Fare Plan for Airline Recovery,'' which 
maps out both short and long-term plans for the rejuvenation of the 
airline industry, which is critical to both strong travel agency 
recovery and commerce, as a whole, in the United States.
    We estimate that our Fare Plan will result in an additional five 
billion dollars of annual revenue for the airlines, more passengers 
flying at fairer prices, and companies better able to leverage their 
dollars while having a credible airline system necessary to conduct 
business. The second part of the plan for airline and travel industry 
recovery introduces a reconstructed and renewed distribution model.
    It's a complex and rather arcane subject so I have submitted in 
writing this plan in its entirety. I will, however, be happy to answer 
questions you might have relative to the white paper later in the 
session.
    A healthy airline industry, through the realignment of faring and 
distribution, in addition to cost cutting measures now taking place, 
should result in the return to a strong travel industry and the 
resultant effects on commerce.

About Hal F. Rosenbluth:

    Harvard Business Review, inc. Magazine, CIO Magazine, The Financial 
Times and Fortune have recognized Hal F. Rosenbluth, Chairman and CEO 
of Rosenbluth International, as an unconventional leader, a visionary 
and a trend-setter. Dozens of periodicals, including USA Today, The New 
York Times, Wall Street Journal and Working Woman, have recognized Mr. 
Rosenbluth's business philosophies and practices. Hal Rosenbluth's 
dedication and vision have grown Rosenbluth International to a global 
company employing 5,200 associates worldwide.
    The Business Enterprise Trust honored Mr. Rosenbluth for his 
company's courage, integrity and social vision in business with its 
Business Enterprise Trust Award. The National Conference of Christians 
and Jews bestowed him with its 60th Anniversary Humanitarian Award for 
outstanding contributions to the advancement of respect and 
understanding among all people.
    In response to widespread requests for information on Rosenbluth 
International's growth, corporate culture, and human development 
programs, Mr. Rosenbluth co-authored a book titled, The Customer Comes 
Second and Other Secrets of Exceptional Service (William Morrow, Inc. 
1992). The book was an immediate best seller, and has since been 
translated and distributed in the Asia Pacific region, Europe and the 
Americas. In June of 1998, Mr. Rosenbluth released another book titled 
Good Company (Caring as Fiercely as You Compete) published by Addison-
Wesley. This book focuses on how companies are able to change 
dramatically while holding fast to core values.
    Mr. Rosenbluth joined the travel management firm in 1974 and worked 
in all areas of the company before being named president in 1985, CEO 
in 1987 and, most recently, chairman. Rosenbluth International has 
grown steadily and rapidly under Mr. Rosenbluth's direction, with 
annual sales increasing from 20 million USD in 1974 to more than 6 
billion USD today. Rosenbluth International now has the second largest 
presence in travel management in the world with corporate owned offices 
in 24 countries. Despite tremendous growth of the 108-year old 
organization, its commitment to providing the highest level of quality 
service has remained unchanged for more than a century. The company 
also has received numerous honors for its dedication to its associates 
including being named as one of the ten best companies to work for in 
America in the book titled The 100 Best Companies to Work for In 
America, by Milton Moskowitz and Robert Levering, and ranked 29th in 
FORTUNE magazine's inaugural listing of the 100 Best Companies to Work 
for in America, which debuted in January 1998. The company is also well 
known for its technological innovations, and was selected as part of 
CIO magazine's CIO-100 list of companies positioned for success in the 
21st century.
    As a public speaker, Mr. Rosenbluth is widely respected and in high 
demand. Highlights of his previous speaking engagements on management 
and technology include CIO Magazine, CFO Magazine and Business Week 
forums; conferences by Saturn and The American Bankers Association; and 
American Chambers of Commerce in Tokyo and Taipei functions.
    Mr. Rosenbluth sits on the advisory boards of Snider Capital L.P., 
a private equity firm investing in the sports, recreation and leisure 
industries; and PlanetFeedback, an online company that helps consumers 
send their feedback to companies via the Internet.
    Mr. Rosenbluth is an avid cattle rancher with a ranch located in 
Linton, North Dakota. He also is a member of the Beaver Valley Horse 
Club.

              EXHIBIT A: A FARE PLAN FOR AIRLINE RECOVERY

    A great deal has been written about the very much maligned airline 
industry, most of it negative, and a good deal of it deserved. It is a 
fascinating subject in which most everyone has an opinion regarding it, 
but very few have offered up any ideas on how to better it. Although 
most love to hate them, to many Americans the US airlines represent a 
symbol of strength and a testament to commerce. While children gaze up 
into the skies and are fascinated by a plane's ability to stay in the 
air, many an adult wonders as to why so many are currently grounded in 
the desert.
    Airplanes are an ingenious invention. As we peer through airport 
windows, we marvel at the strength a fuselage imparts on us. Yet when 
we think about the airline industry we ponder how the cumulative effect 
of so much strength has amounted to so much corporate weakness. As an 
intermediary, or for that matter, an infomediary, we have the advantage 
of a 360 degree perspective. We see far more than any particular 
stakeholder or constituency involved in the airline conundrum. We 
communicate at the highest of levels with airlines executives, service 
many of the world's most prestigious corporations, and communicate with 
customers over 100,000 times a day. It is from that position that we 
posit one company's formula for creating a vibrant, healthy airline 
industry that is good for the public, airlines, corporations and the 
country, alike.
    Recently, many carriers have gone to great lengths to remove cost. 
Some are making headway, and some remain stuck in a quagmire. One way 
or another, the airlines must get their costs in line or they will 
simply perish. What is apparent, however, is that the airlines with 
great leadership also seem to those with the best labor relations and 
ultimately, the greatest opportunity for sustained success. The good 
news is that we finally have in place the best airline leadership seen 
in years. Virtually every CEO of an airline, whether major or low cost, 
recognizes the importance of its people and their collective customers. 
This is a great place to start.
    Most of what is written these days deals with the cost side of the 
airline equation. I'm going to take a different track and focus on the 
OTHER two critical, yet misunderstood issues, REVENUE and DISTRIBUTION.
    At first glance, what is outlined below may seem counterintuitive. 
However, corporations with sophisticated, realistic travel programs and 
legitimate airline discounts programs support the need for reform, and 
our approach to it. After all, where would corporations be without 
airlines and vice-a-versa? Companies and individuals want a fair price. 
They don't want to feel disenfranchised by the seemingly intractable or 
worse yet, illusionary pricing that exists today. Fare construction is 
esoteric and needs explanation in order for us to move to the airfare 
reform. It's too late to continue to work the fringes. There are too 
many livelihoods at stake and the public needs a profitable airline 
system.
    The sad news is that nary a day goes by when tens of millions of 
dollars flow down the drain because the airline fare and distribution 
structure is broken. It used to be that what the airlines would admit 
to us privately, they now do so publicly. Recently there have been some 
pricing initiatives by airlines that address the so-called ``edges.'' 
Fees for paper tickets, extra bags, and even non-refundable tickets are 
now becoming non-refundable.
    When these recent fare announcements were made, we informed the 60 
or so client corporations who subscribe to our DACODA Client Yield 
Management System that these new fees and restrictions will cost them 
$36M a year in the form of higher fares. If you play this out to the 
whole market, we calculate that the carriers plan to take back is 
approximately $800M worth of ``edges'' on an annual basis. While panned 
by most consumer advocates, this activity is necessary and will 
positively affect their combined revenue deficit, but like a long dry 
summer, one heavy storm does not a garden grow. Real structural fare 
reform is necessary, one that works for corporations, consumers, and 
the airlines alike. Reform that will increase ridership, improve 
average yields, reward corporations for loyalty and support, and close 
the gap between leisure and business fares.
    I'd like to suggest that the airlines take a close look at the real 
cause of the slippage. Examine indiscriminate corporate discounting and 
the resultant effect of raising walk up fares to offset them, thus 
creating the disparity between high business fares (which less than 10 
percent of the public actually buy, a number far below what it was when 
this fare level was far lower and far more realistic) and leisure 
fares.
    The issue at hand is significant but not complicated. To increase 
revenue, the airlines have been raising fares in an inelastic 
environment. To maintain market share, they have offered significant 
corporate discount programs. Sounds simple, right? In fact, the 
airlines have been raising published business fares in what had become 
the world's longest running game of Cat and Mouse. Just when a 
corporation thought that they had structured a deal to really lower 
their business travel expenses, the carriers would raise the BASE of 
those fares, effectively eliminating the discount. This practice gnaws 
at the very people these discounts are aimed to reward.
    One unintended result of this ubiquitous discounting scheme has 
been that base fares have gotten so high that it has negatively 
impacted the travel spend (and corresponding revenue earned) from the 
small to mid size customers who don't get the large corporate 
discounts. The other resultant effect with this practice is that 
corporations with properly constructed programs, and who comply with 
the terms of the agreements, have been artificially subsidizing those 
who haven't. Companies not achieving the required market share and/or 
volume hurdles continue to receive front ended discounts as airlines 
feel pressured to look the other way, rather than enforce the penalties 
for non compliance. Where else can someone get the same volume discount 
whether they buy in bulk, or not? This has infuriated corporations that 
have lived up to their side of the bargain, and frankly, I don't blame 
them.
    If we don't fix this now, a possible result of continuing to ignore 
this discontinuity is that during this era of financial pressure, the 
airlines might irrationally respond by eradicating corporate discounts 
all together, in an attempt to raise yields. This would not be good for 
corporate America, the airlines, or commerce as we know it today.
     In a word, the corporate pricing structure of the airlines is 
broken. Airlines won't publicly state that they are in a mess they 
can't get out of, yet privately, they are quick to agree that lemming 
pricing has ruled the day for the past two years. Yet, in fear of 
losing market share, carriers have continued to match discount deals on 
some programs that are mathematically impossible for corporations to 
deliver--an irrational business behavior.
    There is a better way, a way that works for everyone. For 
simplicity, let's call it ``The Fair Fare Plan''. Here's how it works:

For the Carriers:
        Step 1: Reduce walk-up fares from which all corporate discount 
        programs are benchmarked by 30 percent
        This will bring back the small business travelers that are 
        price sensitive and cannot afford the current walk-up fares and 
        are not privy to corporate discount programs reserved for 
        larger corporations. If carriers believe in fare elasticity, 
        this should increase demand.
        Step 2: Reduce all corporate discount programs by 30 percent
        This step will cancel out the impact of the walk-up fare 
        reduction for airlines, while keeping corporations whole.
        Step 3: Evaluate every corporate incentive program
        If the deal cannot be justified in reasonable ROI terms, send a 
        notice of cancellation. Rationalize the deals, but do not 
        penalize those who earn and perform. In fact, since 
        corporations that are currently performing are artificially 
        subsidizing those that do not, they should be rewarded for 
        doing so by receiving deeper discounts for enhanced 
        performance. Those corporations should not have to shoulder the 
        load for those that don't perform. After all, that is one of 
        the major reasons that airlines constantly find themselves 
        having to raise walk-up fares in order to try and recoup lost 
        revenue.
        Step 4: Be forthcoming with corporations
        If upcoming schedule changes will make it mathematically 
        impossible for them to perform on negotiated performance 
        hurdles, deal with it upfront.
        Step 5: Re-evaluate Web Airfares
        Web fares drive corporate travel buyers, travel agents and 
        travelers crazy. Is it better to save $30 in distribution costs 
        and lose $300 in revenue? Take a hard look at the web-only 
        discounts and ask the following question: Are business 
        travelers able to buy airfares for less than they would via the 
        company-preferred program? If the answer is yes, then remove 
        that inventory from the web because either by design, or 
        default, this only de-leverages corporations' ability to 
        perform on the discount programs that have been negotiated. In 
        the end this is a lose-win situation. Airlines win when 
        companies come close to hurdles but don't hit them. Companies 
        lose since fifty dollars saved ``here or there'' over the web 
        only serves to cannibalize their discount programs and risk 
        hundreds of thousands of dollars in discounted savings.
        Don't get me wrong, web fares have their place, they are a good 
        thing. The problem lies in the reality that many airlines 
        maintain multiple pricing departments; one for published fares 
        available through multiple channels, one for web fares on 
        airline owned sites, one for web fares on non-owned sites, one 
        for web fares on partially owned sites, one for corporate 
        discount fares, and so on. The other problem is that in some 
        airlines these departments don't roll up into a common 
        organization, and thus making fare rationalization almost 
        impossible.
For Corporations:
        Step 1: Negotiate in good faith
        Have responsible data, don't commit to what you can't deliver, 
        and make certain you have the technological capabilities to 
        move share and deliver volume.
        Step 2: Monitor your performance.
        Watch your deal so you can make periodic adjustments in order 
        to guarantee achievements of commitments made. Ensure that you 
        have the point of sale technology in place to quickly adjust 
        share and deliver volume. Utilize a sophisticated travel 
        management company that can apply the software necessary to 
        communicate to you shifts in airline available seat miles, 
        schedule changes, etc.--all that can affect your ability to 
        perform.
        Step 3: Don't accept short-term handouts
        However great the temptation, never forget the tale of the 
        goose that laid the golden egg.
For Travel Management Companies:
        Step 1: Create value for your customers
        Share your knowledge and expertise on negotiating fair and 
        reasonable airline deals with or on behalf of your corporate 
        clientele.
        Step 2: Bury the hatchet between yourselves and airlines
        Don't think that pushing carriers to raise their discounts out 
        of revenge for lowering commission, or other perceived bad 
        deeds of the past, will ultimately be of benefit.

    Corporations and agencies need to work with airlines to help foster 
an environment that is win-win-win. Short term thinking equals short-
term gain and in a short time there will be a shorter list of carriers 
available to fly. That is a long-term bad thing for buyers.
    Our proposed solution promotes a greater degree of shared risk and 
is composed of variability in share and discount. Utilizing available 
technology, a discount rate would be agreed upon between an airline and 
a corporation in return for a projected share of a company's business 
for ninety days. At the end of that period, the deal would be measured 
to test assumptions and review ROI for both the buyer and supplier. The 
discount and share is then adjusted for the next ninety days and 
continues as long as both parties continue to see value. The days of 
evergreen discounting without sufficient post due diligence are coming 
to an end.
    Technology exists today that is available to corporations, travel 
management companies and airlines that will pinpoint the exact discount 
level that will reward corporations for moving share and hitting volume 
hurdles, while creating incremental revenue for carriers, therefore 
making the discounts meaningful and long-lasting.
    If we change course now, we can build a healthier industry with 
vibrant competition that will result in reasonable incentives offered 
to reasonable buyers in return for reasonable support. Or, we can stay 
the course and continue with Junk Bond Airline Valuations, a future of 
fewer carriers with less reason to discount and more reason to 
introduce oligopolistic pricing, unhappy buyers and unhappy travel 
agents.
    Bottom line. We estimate that our Fare Fare Plan will result in an 
additional five billion dollars of annual revenue for the airlines, 
more passengers flying at fairer prices, and companies better able to 
get their monies worth while having a credible airline system necessary 
for them to conduct business.
    Another problem in need of fixing is distribution. Whether a 
business' distribution is wholly owned, outsourced, or a combination of 
both, there exists a GOLDEN RULE: Don't under price your distribution 
network; you will obliterate its value. Every industry in the world 
understands the rationale of nurturing its channels of distribution 
except for one: the airline industry.
    While rushing to reduce their distribution costs to win the 
approval of the financial community, airlines have let one pertinent 
detail slip through the cracks. By virtually eliminating compensation 
paid to travel agencies, their out-sourced distribution system for 
reservations and ticket distribution, they may have unintentionally 
created a situation requiring them to return to the 1950s and re-in-
source their reservations and distribution of tickets. This would come 
at a cost far greater than they could have ever imagined.
    For years now, airlines have been focusing their efforts around 
reducing their own expenses. The challenge is that instead of reducing 
the total cost of distribution, they focused on reducing expenses by 
the reduction of standard commissions to travel agencies. In essence, 
airline expenses would go down but the costs associated with 
distributing tickets would not.
    By reducing commissions, and thus creating the need for agencies to 
charge fees directly to travelers, the airlines have created a 
predatory pricing environment. Airlines sell tickets directly to 
travelers with no incremental transaction fee. They absorb their cost 
of fulfillment by spreading their cost over their entire volume base. 
Concurrently, they pushed the travel agency community to charge fees 
for fulfillment, creating a significant price advantage for themselves.
    If the primary driver for the airlines is to remove the agency 
distribution costs from their profit and loss statements, there is a 
very simple solution: institute a fulfillment fee for every ticket 
distributed directly by an airline. This would level the playing field 
by charging fulfillment costs within direct AND indirect channels of 
distribution and, as a result, equalize the cost of airline tickets 
across all channels. An airline would then be able to lower its direct 
distribution costs, increase its revenue stream, and equalize its 
channel pricing structure. After all, since the airlines pay no 
commissions to travel agencies and travel management companies, their 
most expensive form of distribution has become DIRECT. The expense of 
having call centers and the technology and communication expense 
attributed to it is far greater than the free and ubiquitous agency 
distribution system. In all candor, why would any airline want to field 
calls directly if it only adds cost to do so?
    By charging a transaction fee, airlines would uncouple and create a 
transparency for their cost of distribution. They would create a 
revenue stream that would offset their internal cost of distribution, 
and at the same time further legitimize transaction fees for the agency 
community. The same rationale also holds true for hotels and car rental 
agencies. Travel providers need to reevaluate their distribution 
strategies and business models. Let common sense prevail.
    Taking things a step further, and really pushing the edge of the 
envelope we offer the following scenario for consideration:
1. You fly, we'll buy--A return to a classic distribution model
    Carriers should consider getting out of the pricing business 
altogether. The combined efforts have confused and frustrated everyone 
involved for years. Sell seats to brokers, businesses, distributors and 
market makers who make money on the resale margin. Carriers could 
create price floors and ceilings based upon relationships, the size and 
length of commitments and market preferences. Carriers should be 
content with selling at their cost plus a respectable margin. This 
basic commercial instinct has eluded the industry since deregulation. 
There can be no more making it up in volume.
    The most efficient and productive carriers will win in the long 
run. Most industries have learned to prosper with this model. Just 
compare the market value of companies like Best Buy, Wal-Mart, Home 
Depot, Target, JP Morgan Chase, Citigroup, Bank of America, CVS, Rite-
Aid, and Amazon.com to the whole commercial airline sector. These fine 
companies thrive on selling other's people's products. They often take 
inventory positions and resell goods and services to the public or to 
business. Not an alien concept.
    Eliminate direct corporate discounts as carriers have proven their 
inability to price responsibly. Allow corporations to purchase seat 
blocks via brokers, distributors. A return to a classic distribution 
model will result in significant reduction in sales/marketing expense 
in lower or elimination of GDS and merchant fees, as the distributor/
reseller will now take responsibility for these costs. Additional 
expenses could be removed as carrier direct sales and deal management 
resources could be eliminated.
2. Allow Structured and Planned Consolidation
    Four strong carriers are more likely to compete against each other, 
as substitutability amongst networks will become more likely. The 
resulting competition will stimulate price and capacity controls. Non-
stop origination and destination markets should see at least two 
network competitors. Other O&D markets should see more viable 
connection options.
    By allowing 4 larger ``network'' carriers to emerge, economies of 
scale and superior purchasing leverage will be created. This should 
result in lower costs for aircraft acquisition, fuel purchasing, 
maintenance, training, and headquarters functions. Additional savings 
will be found in better utilization of airport gates and use of 
terminal facilities.
    We foresee the following potential ``marriages'':
    American Airlines--Having already gobbled up TWA to emerge as the 
largest carrier in the world should prosper in the future as one of 
four network carriers. With 20 percent overall market-share, a strong 
balanced network presence and excellent management, American is poised 
to not only survive, but to prosper. AA will focus on NYC, CHI, DFW, 
MIA, SJU, STL and SJC.
    United Airlines--After filing for bankruptcy protection, should be 
allowed to acquire the assets of US Airways and create a larger entity 
with approximately 23 percent market-share. We believe that the new, 
larger United Airlines can successfully compete as a network provider. 
UA would focus their activities in DEN, CHI, PHL, WAS, SFO, CLT and 
LAX.
    Delta Air Lines--Should be allowed to acquire America West and 
combine to control a 19 percent share of the market. The new Delta Air 
Lines can fill out gaps in its Southwestern Region with a Phoenix Hub 
and truly claim a national presence. America West is simply too small 
and too fragile to offer any real competition in its current form. DL 
will consolidate its' assets in ATL, NYC, CVG, PHX, SLC and BOS. The 
only caveat here is that Texas Pacific's ownership in America West, 
plus their option for up to 38 percent of US Airways might place 
America West in the United, US Airways group.
    Northwest Airlines--Formed from the joining of Continental Airlines 
and Alaska Airlines with Northwest will create a new entity claiming 21 
percent market-share. The larger and more balanced Northwest Airlines 
will prosper from and enhance the many employee friendly policies of 
Continental and Alaska. This new powerful force will also count on a 
large international network to support its' success. NW will have a 
sizable presence in NYC, IAH, MSP, DTW, SEA and MEM.
    In order to address the inevitable doomsayers, the imposition of 
price ceilings on hub-to-hub monopoly services should be instituted to 
discourage price gouging in the following manner.

    Example: MSP to DTW--Nonstop

    Now: NW Monopoly

    Future: NW limited to charging average yield on Hub to Hub as for 
average of other similar stage length services. MSP to DTW average 
fares must not exceed average prices charged for routes with similar 
stage lengths.

    I know this all sounds very controversial, but we have been 
conditioned by politicians and other so-called consumer advocates to 
resist the ideas of consolidation without allowing any serious debate 
on the potential merits. Carriers have themselves pointed weapons at 
their own feet and pulled the trigger when asked to comment on 
potential mergers between their competitors. Look how Continental 
fought to keep British Airways and American Airlines apart, but sees no 
reason why they should not be allowed to join forces with Delta and 
Northwest. What's good for the goose must be good for the gander. We 
currently have eight weak carriers, some in or headed to Chapter 11, 
asking for loan guarantees, all losing money and patiently waiting for 
the economy to brighten their collective horizons. Why not opt for four 
stronger providers, all with a chance to make a go of it? How many 
network carriers does the U.S. need? Looking at similar sized markets 
may lead us to an answer. Japan has two, Europe has three, and China is 
moving to consolidate to four. Why does the U.S. need more than four?
3. Foreign ownership/service rules should be lifted
    Allow international carriers to invest in U.S. carriers and/or 
allow foreign carriers to operate within the USA. There are some very 
profitable foreign carriers with money to invest. Qantas, Singapore, 
Lufthansa and Air France might all be enticed to make deals. Is it 
better to get hand outs from tax payers or investments from other 
carriers? We are all familiar with other foreign investments in U.S. 
businesses. The global marketplace assumes these kinds of transactions. 
U.S. companies own major stakes in of dozens of foreign corporations. 
Lest we forget that GM owns Aston-Martin, Opel and Saab, Ford owns 
Jaguar, Volvo and Land Rover amongst others and that DaimlerChrysler 
owns large stakes in both Mitsubishi and Maserati. We should no longer 
need or wish to sustain historical barriers that prevent these 
transactions from occurring. The airline industry is not sacred or 
immune from the global economy. In fact, the global economy relies on a 
vibrant airline industry.
4. Greater differentiation between Business/Leisure Products
    Customer Service complaints from the profitable business segment 
have as much to do with low and common standard of service to all 
customers as it has to do with higher prices. In general, and 
regardless of the price paid, passengers enjoy the same seat size and 
pitch, meal and beverage service; check in experience, boarding 
experience, frequent flyer miles earned, gate waiting experience, and 
security lines. Unless you are an Elite, Preferred, and Stratosphere 
Warrior and even then that isn't always enough, you can count on the 
same customer experience as granny on her annual visit to the 
grandkids. You'll pay up to ten times what granny paid in the comfort 
that your extra contribution ensures that you can see you own kids on 
Friday night. Would this model be accepted in any other industry? 
Imagine paying $1000 more per night for an identical hotel room just 
because USA Today was left hanging on the door handle and you had 
access to email and a mini-bar. I would love to hear the conversation 
that suggested that in order to pay $100 a night you would have to stay 
until Sunday!!!!
    It's true: the airline industry is broken, but it's not that hard 
to fix. Just as baseball was at the brink, so remains the plight of the 
airlines and the passengers that fly them. Many of the ideas we have 
tried to share will undoubtedly face enormous hurdles and obstacles, 
but as an industry participant, corporate advocate, supplier partner 
and traveler, we think they deserve their day in court. Who knows, 
maybe we have the formula to fix the industry . . . what we know for 
sure is that right now all we see is a recipe for disaster.

    Senator Dorgan. Mr. Rosenbluth, thank you very much.
    Next we will hear from Jonathan Tisch, Chairman of the 
Travel Business Roundtable. Jonathan, welcome.

    STATEMENT OF JONATHAN TISCH, CHAIRMAN, TRAVEL BUSINESS 
                           ROUNDTABLE

    Mr. Tisch. Thank you, Mr. Chairman. I am Jonathan Tisch, 
Chairman of the Travel Business Roundtable and Chairman and CEO 
of Loews Hotels. Before I begin, I would like to thank Chairman 
Dorgan and Ranking Member Fitzgerald for holding this important 
hearing and inviting the Travel Business Roundtable to testify. 
I ask that my written statement be included in the record.
    Senator Dorgan. Without objection.
    Mr. Tisch. Over the past year, the travel and tourism 
industry has faced significant challenges on several fronts. 
When people stopped flying after September 11th--or in many 
cases stopped traveling altogether--they also stopped staying 
in hotels, eating in restaurants, visiting museums or theme 
parks, renting cars or shopping. As a result, hundreds of 
thousands of industry workers were laid off or workers had 
reduced hours and companies faced steep revenue shortfalls, and 
State and local governments saw a rapid decline in tax revenues 
that were badly needed in this recessionary economy.
    Though lower prices and increased security measures have 
helped Americans travel again, the ongoing economic uncertainty 
in the U.S. and the perceived hassle factor associated with 
flying remain strong barriers to the industry's recovery. The 
slight recovery we are seeing in some industry sectors and 
areas of the country is uneven. A number of examples of the 
disparity of the industry's recovery are included in my written 
statement, but I would like to cite just a few.
    The Travel Business Roundtable conducted a poll in August 
on travel patterns one year after September 11th. A summary is 
attached to my written statement. It did find that while people 
perceive airline travel to be relatively safe, the 
aforementioned hassle factor, a lack of confidence in the 
sufficiency of airport security, and inconsistencies in the 
screening process amongst airports confirm a recent trend to 
drive instead of to fly. More than 1 in 10 travelers have 
canceled their flights or fly less frequently because of the 
hassles, and nearly 1 in 5 frequent business travelers are 
traveling less often.
    The Federal Reserve's September Beige Book showed that 
while leisure travel is up in 6 of the 12 districts, business 
travel is off across the country. Even in districts that are 
seeing increased visitor traffic, room rates are down and 
travelers are spending less on food and entertainment.
    As Chairman of NYC & Company, New York City's convention 
and visitors bureau and official tourism and marketing arm, I 
can report to you that while we are able to maintain roughly 
the same number of domestic visitors in 2001 as we had in 2000, 
spending was off by nearly $1 billion.
    It is important to note that the unevenness in the recovery 
is not just affecting employees and owners of travel and 
tourism businesses. Cities, counties, and States have also been 
affected by the decline in the tourism and sales tax revenues 
that visitors bring to these jurisdictions.
    Where can we go from here? A collaborative effort will be 
the key to recovery. Included in my testimony are a number of 
recommendations about how we can work together to achieve a 
true recovery for travel and tourism. We offer these 
suggestions with the recognition that the Federal Government is 
facing fiscal restraints. With that in mind, we are not asking 
for things that are unrealistic or unachievable. However, we 
hope that you will agree that a small investment now will yield 
multiple returns for our Nation's economy in the coming years.
    A major part of our effort must include attracting more 
international visitors. We are losing market share and with it 
job and tax revenues to our foreign competitors who are 
spending vast sums of money to promote their countries. Though 
travel and tourism generated a balance of trade surplus of 
nearly $26 billion in 1996, by 2001 that surplus had plummeted 
to only $7.7 billion. Moreover, the U.S. continues to rank as 
the third most sought after international destination behind 
France and Spain.
    In 2000, international visitors spent approximately $106 
billion in this country. It is well known that international 
travelers spend far more than domestic travelers. For example, 
in 2000, though foreign visitors made up only 18 percent of New 
York City's total visitors, they were responsible for 42 
percent of all visitor spending.
    Beyond the financial benefits, the need to better define 
America abroad has become all too clear since the events of 
last fall. The marketing of the United States overseas would be 
an ideal mechanism to help combat misconceptions about us 
around the world.
    What do we recommend? TBR is discussing with the Commerce 
Department the possibility of undertaking partnered research 
that would examine successful international marketing efforts 
by our largest foreign competitors. We hope that this study 
will create a road map for the development of an economically 
and politically credible international destination marketing 
campaign.
    We hope that you will consider the following incremental 
measures as small investments that will yield multiple returns 
in the coming years.
    We ask that you:
    Urge the President to establish an advisory council on 
travel and tourism;
    Create a destination marketing pilot program that would 
help a select group of cities and States undertake 
international marketing initiatives;
    Increase funding for the Commerce Department's Market 
Development Cooperator grant program to make it more accessible 
to our industry or fund a similar tourism-specific program;
    Enact Congressman Foley and Farr's American Travel 
Promotion Act and work to pass terrorism insurance before you 
adjourn;
    Increase and restore the tax incentives that spur business 
travel by increasing the business meals and entertainment tax 
deduction and restoring the spousal travel deduction;
    Continue funding for the Commerce Department's Travel and 
Tourism Satellite Accounts;
    Ensure that the industry has a consultative role in the 
creation of the new Department of Homeland Security;
    Work with mayors and Governors around this country to 
develop achievable travel and tourism strategies.
    My final request requires no congressional action but would 
make all the difference to our industry. Above all things, I 
urge you and your colleagues to help end the indifference that 
Washington has long held toward us. The 1950's industrial 
economy has given way to the 21st century service economy. 
Travel and tourism now defines that service economy around the 
world. We create jobs. We create careers. We fulfill important 
social policy goals, and we contribute more than $99 billion in 
tax revenues and create an enormous travel trade surplus. We 
are in all 50 States. We are in all 435 congressional 
districts. In short, we are your core constituencies. Please 
respect our contribution by nurturing our business and 
employees with policies that will enable us to accomplish even 
more.
    Again, I thank you for inviting TBR to testify. We look 
forward to continuing our work with you as we enact realistic 
policy solutions to spur increased travel to and within the 
United States. I am happy to answer any questions that you may 
have. Thank you.
    [The prepared statement of Mr. Tisch follows:]

    Prepared Statement of Jonathan Tisch, Chairman, Travel Business 
                               Roundtable

Introduction
    I am Jonathan Tisch, Chairman of the Travel Business Roundtable 
(TBR) and Chairman and Chief Executive Officer of Loews Hotels. TBR is 
a CEO-based organization that represents the broad diversity of the 
U.S. travel and tourism industry, with more than 70 member 
corporations, associations and labor groups. Loews Hotels, 
headquartered in New York City, operates 18 distinctive properties in 
the U.S. and Canada, including the Regency Hotel in New York and the 
Loews L'Enfant Plaza and Jefferson hotels here in Washington. The 
company employs more than 8,000 people across the United States. I am 
testifying today on behalf of both organizations about the state of the 
U.S. travel and tourism industry in the post-September 11 climate.
    Before I begin, I would like to thank Chairman Dorgan and Ranking 
Member Fitzgerald for holding this important hearing and inviting TBR 
to testify. Senator Dorgan, our industry is particularly appreciative 
of your many years of leadership on issues that affect the travel and 
tourism industry and the traveling public, as well as your keen 
understanding of the importance of our industry to the vitality of the 
U.S. economy.

Current State of the Industry
    Over the past year, the travel and tourism industry has faced 
significant challenges on several fronts. It became apparent very 
quickly during the days and weeks following September 11 that the 
problems facing our industry were not simply airline-related. When 
people stopped flying--or in many cases traveling by any mode of 
transportation--they also stopped staying in hotels, eating in 
restaurants, visiting museums or theme parks, renting cars or shopping. 
As a result, hundreds of thousands of travel and tourism industry 
workers were laid off or had their hours reduced, travel and tourism 
companies faced steep revenue shortfalls and state and local 
governments saw a rapid decline in tax revenue upon which they were 
particularly reliant in the recessionary economy.
    Though lower prices and increased security measures have helped get 
Americans traveling again, the ongoing economic uncertainty in the U.S. 
and the perceived ``hassle factor'' associated with flying remain 
barriers to the industry's recovery, and the slight recovery we are 
seeing in some industry sectors and areas of the country is uneven. As 
a result, individuals and businesses continue to cut back on 
discretionary spending, including travel. Vacations are being shortened 
or canceled altogether, and businesses continue to reduce non-essential 
travel. In addition, international arrivals continue to lag behind pre-
September 11 levels.
    The numbers speak for themselves:

   TBR recently conducted a poll on travel patterns one year 
        after September 11 (summary attached). While 89 percent of all 
        travelers think airport security is better now than it was 
        before last fall, three in 10 (30 percent) believe that the 
        current level of security measures imposed so far are 
        ``insufficient'' and more can be done--an increase of five 
        percentage points from last October. In addition, more than one 
        in 10 travelers (11 percent) have canceled their flights or fly 
        less frequently because of the hassles of airport security. 
        While commercial airline travel is perceived to be very safe, 
        the ``hassle factor'' associated with heightened airport 
        security, a lack of confidence in the sufficiency of the 
        airport security measures and inconsistencies in the screening 
        process from one airport to another confirm a recent trend by 
        travelers to make trips by car instead of airplane. For 
        example, 44 percent of business travelers said they now travel 
        by car more frequently for out-out-town trips.

   The September 11, 2002 edition of the Federal Reserve's 
        Beige Book showed that while leisure travel is up in six of the 
        12 districts, business travel is off across the country. Even 
        in districts that were seeing increased visitor traffic, room 
        rates are down and travelers are spending less on food and 
        entertainment.

   The Business Travel Coalition's 2001 Business Travel Survey 
        reported that businesses cut their travel by 28 percent after 
        September 11. In August, the BTC stated that business travel 
        will continue to be cut an additional 11 percent this year.

   The U.S. Department of Commerce's Office of Tourism 
        Industries reported in August that international arrivals to 
        the U.S. were down by 12 percent in the first quarter of 2002.

   According to the Hotel Employees and Restaurant Employees 
        International Union, in the days and weeks following the 
        terrorist attacks, 30 percent of HEREIU workers lost their jobs 
        due to the decline in tourism. One year later, 15 percent of 
        the Union's members are still out of work, and many of those 
        who are employed are working reduced hours.

   The National Restaurant Association reports that while sales 
        at restaurants and bars have been strong in 2002, employment in 
        these establishments remains down by 180,000 jobs since the 
        recent peak in July 2001. Moreover, job growth at restaurants 
        and bars fell well below the overall economy in recent months. 
        In the 12 months ending August 2002, restaurant and bar 
        employment declined at a 1.8 percent rate, or double the 0.9 
        percent decline in the country's total non-farm employment 
        rate.

   New York City's convention and visitors bureau, NYC & 
        Company, of which I am Chairman, reports that while the City 
        has seen an upswing in domestic leisure visitors in the past 
        year, its recovery is partial, as business travel, visitor 
        spending and lengths of stay are down. Preliminary numbers 
        indicate that international visitorship is down as well.

   According to the Convention Industry Council, more than 100 
        exhibitions were canceled last year, and trade show attendance 
        dropped more than 20 percent in the fourth quarter of 2001. 
        Attendance at tradeshows this year is down 8 to 10 percent, and 
        the renewal rate on most exhibitions is off by 50 percent or 
        more. Moreover, international attendance at tradeshows has 
        fallen by 50 percent since last September.

   Economists and travel planners have said that they do not 
        expect the hotel industry to return to the profit levels 
        experienced in 1999 and 2000 until mid-2004 at the earliest.

    It is extremely important to note that this unevenness in recovery 
is not just affecting the employees and owners of travel and tourism 
businesses. Cities, counties and states that were already beginning to 
see budget shortfalls due to last year's economic downturn have also 
been deeply affected by the decline in the tourism and sales tax 
revenues that visitors bring to their jurisdictions. Forty-one states 
are currently experiencing major budget shortfalls, and Governors often 
cite a dramatic decline in travel and tourism tax receipts as a major 
cause. As a result of these revenue declines, states and local 
governments have been forced to reduce services at exactly the same 
time their citizens--who are also feeling the effects of the economic 
slump--require more assistance.

Where Do We Go From Here?
    The travel and tourism industry, as well as many states and cities, 
have undertaken a number of efforts in the past year to encourage 
people to start traveling again. TBR took the lead last fall to work 
with Senators and Members of Congress to craft viable proposals to 
stimulate travel that could be included in an economic stimulus 
package. We also commissioned two major surveys--conducted at the 
beginning and end of October 2001 by Penn, Schoen, Berland and 
Associates and Burson-Marsteller--which we shared with the industry and 
the Federal Government, that helped us gain a better perspective of 
traveler confidence. On the marketing side, the Travel Industry 
Association launched a Travel Industry Recovery Campaign, funded by all 
sectors of the U.S. travel and tourism industry, which included a plea 
from President Bush for people to start traveling again. On the local 
level, states such as Florida and California, and cities such as New 
York and Washington, undertook successful public-private advertising 
campaigns to attract travelers in the region and within their own 
jurisdictions. We can all be proud of how our industry and state and 
local governments came together to work toward recovery. And, while we 
are seeing promising signs that reaffirm the progress being made, we 
clearly have more work to do as we look to work collaboratively with 
our elected officials to find solutions that will get more Americans 
traveling, and spur more international travelers to visit the U.S.
    The collaborative nature of this effort is key. Included in my 
testimony are a number of recommendations about how the industry, 
states and local governments and the Federal Government can work 
together to achieve a true recovery for travel and tourism in the U.S. 
However, the most fundamental thing that you, as Senators, can do right 
now is listen to us and believe us when we say that the United States 
and all of the destinations within it represent a unique product that 
we can and must market to the world with as much effort as we market 
any other American export product.
    Just as we worry about losing market share to our foreign 
competitors for products such as automobiles and computers, Americans 
need to understand and respond to the fact that we have been losing out 
to our foreign competitors in the area of travel and tourism for 
several years now. The events of September 11 only served to exacerbate 
that decline. The numbers paint a very clear picture. Though travel and 
tourism generated a balance of trade surplus of nearly $26 billion for 
the United States in 1996, by 2001, that surplus had plummeted to $7.7 
billion. Moreover, for several years now, the U.S. has been ranked as 
the third most sought-after travel destination behind Spain and France.
    What do these countries have that we don't? For one thing, they 
spend tens of millions of dollars to promote themselves to foreign 
visitors. In 1997--the most recent year for which such figures are 
available--the government of Spain spent $71.6 million to promote the 
country as a desirable tourist destination. France spent $57.4 million. 
Meanwhile, the United States spent nothing.
    In 2000, international visitors spent an estimated $106.5 billion 
in the U.S. It is well known that international visitors spend more 
than domestic travelers when they travel. For example, New York City is 
the nation's number-one international visitor destination, and though 
international travelers comprise only a small portion of the City's 
visitors, they are responsible for a disproportionately high level of 
spending. In 2000, though foreign visitors made up only 18 percent of 
New York's total visitors, they were responsible for 42 percent of all 
visitor spending. It seems like good business sense--and good policy--
to spend some money on promoting what the U.S. can offer to these 
visitors in an effort to retain and grow this powerful market share.
    Beyond the financial benefits, travel and tourism increases 
awareness and understanding among diverse cultures and can help 
eradicate prejudices based on ignorance. The need to better define 
America abroad has become all too clear since the events of last fall. 
The marketing of the United States overseas would be an ideal mechanism 
to help combat misconceptions about us around the world.

Recommendations
    TBR has a number of recommendations for both short- and long-term 
programs and initiatives that Congress can enact to help the U.S. 
regain its dominance in the international travel and tourism market, as 
well as stimulate the domestic leisure and business travel sectors. We 
offer these suggestions with the recognition that the Federal 
Government is experiencing the same types of fiscal restraints that 
state and local governments and the private sector are also facing. As 
has been the case since our inception, it is TBR's goal to offer 
politically and economically feasible solutions. We do not want to 
overreach or ask for things that are unrealistic or unachievable. 
However, we hope that you will share our belief that a small investment 
now will yield multiple returns in the coming years.
    For several years now, TBR has been calling for the development of 
an aggressive brand marketing campaign, funded from both private and 
public sources, to promote the U.S. as a desirable travel destination. 
The Federal Government must play a role in this effort, as it is the 
United States as a whole that will be marketed as a product. TBR has 
been in discussions with the Commerce Department and is exploring the 
possibility of undertaking partnered research between the Department 
and the private sector, to be conducted by an academic institution, 
that would examine successful international marketing efforts by our 
largest foreign competitors. We hope that the information derived from 
this important study will create a roadmap for the development and 
funding of an economically and politically credible international 
destination marketing program for the United States.
    Recognizing that resources are scarce and this year's congressional 
timetable is growing shorter, we would like to offer some incremental 
measures to start us on the path to this longer-term goal:

   Establish a Presidential Advisory Council on Travel and 
        Tourism: More than a year-and-a-half ago, TBR called for the 
        creation of this body, which is currently under consideration 
        within the Bush Administration. Comprised of 35 presidentially 
        appointed representatives of business, government and non-
        profit organizations with expertise in policy matters impacting 
        tourism development, the Council would be the ideal body to 
        explore ways that the travel and tourism industry can work for 
        the benefit of our nation. The Council would advise the 
        President on national tourism policy and would help ensure that 
        travel and tourism receives a more sustained and vigorous 
        policy focus at the federal level. It would also help 
        coordinate the activities of the Administration and the many 
        departments and agencies that impact travel and tourism. While 
        the Council would be created by Executive Order under the 
        Federal Advisory Committee Act (FACA), TBR requests your 
        support in urging the President to create this body.

   Create a Destination Marketing Pilot Program: A pilot 
        program should be undertaken immediately to test the efficacy 
        of international destination marketing initiatives. For 
        example, Congress could select five states and five cities 
        across America based upon geographic and population diversity, 
        and appropriate a fixed dollar pool to underwrite a specific, 
        new international marketing initiative. The participants would 
        select their own international targets and could employ 
        whatever marketing strategies deemed appropriate. Within three 
        months of the conclusion of the outreach, a written report 
        would be due to Congress that defined in measurable terms the 
        tangible success of the program's ability to increase the 
        targeted international arrival pool.

   Increase Funding for the Market Development Cooperator 
        Program or Fund a Similar Tourism-Specific Program: We 
        understand that Congress appropriates $2 million annually to 
        the Department of Commerce to run this matching grant program 
        to help state offices, trade associations, chambers of commerce 
        and other non-profit organizations market their non-
        agricultural products and services overseas. While this could 
        be an ideal tool for state tourism offices and convention and 
        visitors bureaus to leverage to promote their destinations 
        overseas, a Commerce official has informed us that the fund has 
        not been tapped for tourism-related purposes--most likely 
        because no one in the industry has heard about it. Increased 
        funding for this program, or the establishment of a similar 
        program that is specifically aimed at travel and tourism 
        ventures, would help encourage eligible travel and tourism 
        entities to take advantage of this program. TBR pledges its 
        assistance in getting the word out to ensure that eligible 
        travel and tourism entities apply for such funds.

   Enact the American Travel Promotion Act (H.R. 3321): Last 
        November, Congressmen Foley and Farr, the Co-chairs of the 
        Congressional Travel and Tourism Caucus, introduced this 
        legislation in an effort to encourage states to boost their 
        travel promotion efforts. We urge Congress to pass H.R. 3321, 
        because we believe the $100 million in matching grants to 
        states that this legislation would provide is a much-needed 
        stimulus to states, local governments and the U.S. travel and 
        tourism industry as a whole.

   Remove Structural Impediments to Expanded International 
        Arrivals: Agencies of the Federal Government such as the U.S. 
        Commercial Service at the Commerce Department, which staffs 
        commercial officers throughout the world, should be better 
        educated to become tourism promotion savvy. Congress should 
        direct federal officials to aggressively look for ways to 
        promote travel to the U.S.

   Increase and Restore the Tax Incentives that Spur Business 
        Travel: The reduction of the business meal and entertainment 
        tax deduction from 100 percent to 50 percent and the 
        elimination of the spousal travel tax deduction negatively 
        affected the restaurant and entertainment industries and the 
        business customers they serve even before September 11, 
        particularly harming small businesses. As I noted earlier, even 
        the Federal Reserve Board has recognized the affects of the 
        drop in business travel across the country. TBR encourages 
        Congress to upwardly revise the business meal and entertainment 
        tax deduction and restore the spousal travel tax deduction. 
        Doing so would provide an immediate incentive for small 
        businesses and corporations alike to authorize their personnel 
        to start traveling again.

   Continue Funding for the Commerce Department's Request for 
        Travel and Tourism Satellite Accounts (TTSAs): TTSAs serve as a 
        primary source of data for tourism policymaking by establishing 
        a consistent, measurable framework for analyzing tourism 
        expenditures and employment in a systematic manner. The sectors 
        measured include purchases of airfares, lodging, meals and 
        beverages, shopping and other travel activities. This research 
        helps the Department and the industry gain a better 
        understanding traveler preferences and economic trends across 
        the varied sectors that make up the travel and tourism 
        industry. TBR urges Congress to continue funding for this vital 
        research.

   Ensure that the Industry has a Consultative Role in the 
        Creation of the New Department of Homeland Security: There are 
        a variety of ways in which the activities of the agencies that 
        will comprise the new Department of Homeland Security will 
        immediately affect the vitality of our industry. With that in 
        mind, TBR created a Homeland Security Task Force this summer 
        and sent to Congress a series of recommendations about issues 
        of immediate concern. The goal of creating a central point of 
        coordination to protect American citizens within our borders is 
        a worthy one, and our industry supports this important mission. 
        As Congress considers legislation on the new Department, we 
        hope you will bear our recommendations in mind, particularly 
        with an eye toward ensuring that there is a formal, 
        consultative process that helps the Department achieve its 
        important mission without compromising the industry's ability 
        to create economic growth throughout our nation.

   Work with Mayors and Governors to Develop Achievable Travel 
        and Tourism Strategies: America's Mayors and Governors are on 
        the frontlines and have an intimate understanding of the power 
        of travel and tourism as a driver for economic development and 
        job creation in their cities and states. We urge you to work 
        closely with them to develop strategies that will spur travel 
        and tourism growth across the nation.

Conclusion
    My final request of you requires no congressional action, but would 
make all the difference in the world to the businesses and employees 
that comprise the U.S. travel and tourism industry. Above all things, I 
urge you and your colleagues to help end the indifference that 
Washington has long held toward the travel and tourism industry. A 
recent independent Gallup poll found that the restaurant industry is 
the most highly regarded business sector in the country, closely 
followed by the travel industry, which ranked eighth. Clearly there is 
a recognition outside the Beltway of our industry's importance. The 
United States, much like the rest of the world, is defined by its 
service economy. The 1950s industrial economy has given way to the 21st 
Century service economy. Travel and tourism defines that service 
economy around the world. We create jobs and careers; we fulfill 
important social policy goals, such as moving people from welfare to 
work; we contribute more than $99 billion in tax revenue for federal, 
state and local governments to drive our economy; and we create an 
enormous travel trade surplus to offset even the worst national balance 
of payments deficit. We are in 50 states and 435 congressional 
districts. In short, we are your core constituency. Please respect our 
contribution by nurturing our employers and employees with policies 
that will enable us to accomplish even more.
    Again, I thank you for inviting the Travel Business Roundtable to 
present its thoughts and concerns today, and we look forward to 
continuing to work with you to enact realistic policy solutions to spur 
increased travel to and within the United States. I am happy to answer 
any questions you may have.
                                 ______
                                 
Membership
    American Airlines
    American Express Company
    American Hotel & Lodging Association
    American Resort Development Association
    American Society of Association Executives
    Amtrak
    Asian American Hotel Owners Association
    Association of Corporate Travel Executives
    Budget Group Inc.
    Business Travel News
    Carey International Limousine
    Carlson Hospitality Worldwide
    Cendant Corporation
    The Coca-Cola Company
    Commonwealth of Puerto Rico
    Delta Air Lines, Inc.
    Detroit Metro Convention and Visitors Bureau
    Diners Club International
    Distinguished Restaurants of North America
    Fairmont Hotels & Resorts
    FelCor Lodging Trust
    Four Seasons Hotels & Resorts
    Greater Boston Convention and Visitors Bureau
    Greater Fort Lauderdale Convention & Visitors Bureau
    Greater Miami Convention & Visitors Bureau
    Gucci Services Ltd.
    The Hertz Corporation
    Hilton Hotels Corporation
    Hotel Employees and Restaurant Employees International Union
    HRW Holdings, LLC
    Hyatt Hotels Corporation
    IBM
    Inc. Magazine
    International Association of Convention and Visitors Bureaus
    International Council of Shopping Centers
    Interval International
    JetBlue Airways Corporation
    Las Vegas Convention and Visitors Bureau
    Loews Hotels
    Los Angeles Convention and Visitors Bureau
    Lufthansa Systems North America
    Mandalay Resort Group
    Manhattan East Suites Hotels
    Marriott International Inc.
    MeriStar Hotels and Resorts Inc.
    The Mills Corporation
    National Basketball Association Entertainment
    National Football League
    National Hockey League
    National Restaurant Association
    New York University
    Newport County Convention and Visitors Bureau
    Northstar Travel Media, LLC
    NYC & Company
    Omega World Travel
    Pegasus Solutions, Inc.
    PricewaterhouseCoopers, LLP
    The Rappaport Companies
    Seattle's Convention and Visitors Bureau
    Six Continents Hotels Inc.
    Smith Travel Research
    Starwood Hotels & Resorts
    Strategic Hotel Capital Incorporated
    Taubman Centers, Inc.
    Tishman Construction Company
    United Airlines
    Universal Studios
    United States Conference of Mayors
    USA Today
    Vail Resorts, Inc.
    Walt Disney Parks and Resorts
    Washington DC Convention and Tourism Corporation
    Waterford Group, LLC
    WH Smith USA Travel Research
    World Travel and Tourism Council
    Zagat Survey
                                 ______
                                 

              Travel Business Roundtable, August 22, 2002

     Survey Shows Traveler Confidence Returning; Concerns Over the 
    Economy's Health is Primary Reason Consumers are Avoiding Travel

   Business travel recovering more slowly than leisure, with 
        nearly one in five frequent business travelers making fewer 
        trips

   Overwhelming majority of travelers think airport security is 
        better now than before September 11, but acknowledge a hassle-
        factor and room for improvements

    Washington, D.C.--Nearly one year after the September 11 terrorist 
attacks, price-cutting by the travel industry and enhanced security 
measures at airports have stimulated demand and largely restored the 
confidence of U.S. travelers. But an industry rebound remains 
uncertain, with leisure and business travelers both citing the economy 
as the prime reason they are traveling less, according to a new 
nationwide survey released today that was commissioned by travel 
website Orbitz for the Travel Business Roundtable (TBR) in conjunction 
with NYC & Company and the Washington Convention and Tourism 
Corporation (WCTC).
    The August 14-15 survey results of interviews with 700 respondents 
follow two surveys administered by TBR in October 2001 that touched on 
many of the same issues. The opinion research was done with a random 
sample of Americans identified as travelers who had taken at least one 
airline trip or spent one night in a hotel during the previous six 
months.
    The new data shows that while nearly 90 percent of Americans are 
now traveling more or at about the same level as before September 11, 
frequent business travelers, who make up the majority of the industry's 
revenue because of their tendency to purchase higher-priced airfares or 
rooms, continue to make fewer trips.
    ``Though lower prices and increased security measures have helped 
get Americans traveling again, the ongoing economic uncertainty in the 
U.S. is a barrier to the industry's recovery,'' said Jonathan Tisch, 
chairman of TBR and chairman and CEO of Loews Hotels. ``With consumers 
seeing their savings significantly decreased or wiped out by the recent 
performance of the stock market or their 401k retirement plans, they 
are cutting back on discretionary spending, including travel. Vacations 
are being shortened or canceled altogether. Likewise, businesses 
continue to cut back on non-essential travel, keeping their travel 
costs down as well.''
    Nearly one-half of all travelers surveyed cited economic factors as 
the reason they would avoid taking a trip. Thirty-two percent of all 
travelers surveyed said budget considerations would be the prime reason 
keeping them from traveling more than 100 miles from home or that 
traveling had become too expensive, and 12 percent said that they are 
not traveling due to economic uncertainty.
    Not coincidentally, the reluctance of Americans to travel could 
hinder the speed of an economic recovery in the U.S. As the nation's 
second largest employer, employing more than 18 million people, and the 
third largest retail industry, travel and tourism was a $582 billion 
industry in 2000, generating nearly $100 billion in federal, state and 
local tax revenues.
    Forty-six percent of business travelers were either much more or 
somewhat more reluctant to travel in the month following the events of 
September 11, and today 39 percent of business travelers remain much 
more or somewhat more reluctant to travel--an improvement of only seven 
percentage points. On the other hand, 27 percent of leisure travelers 
today are much more or somewhat more reluctant to travel--an 
improvement of 18 percentage points from last October.
    According to Jeff Katz, Orbitz president and CEO, luring the 
frequent business traveler back to the air and the road is also 
critical to the travel and tourism industry's recovery.
    ``There are very promising signs that indicate Americans are nearly 
back to their normal levels of travel,'' said Katz. ``The resiliency 
that is being demonstrated by leisure travelers since September 11 is 
especially encouraging. Discounts and great travel deals are still 
available, and continue to help drive the recovery of the leisure 
travel market.''
    Katz continued, ``However, there is a clear lag in the resumption 
of business travel patterns. Among frequent business travelers, 17 
percent say that they are traveling less now--five percent more than 
the population at large. Though a small percentage of the traveling 
population, these frequent business travelers contribute to nearly half 
of the industry's overall revenue.''
    The Orbitz-sponsored survey for the TBR also found:

   While 89 percent of all travelers think airport security is 
        better now than it was before September 11, 2001, three in ten 
        (30 percent) believe that the current level of security 
        measures imposed so far are ``insufficient'' and more can be 
        done--an increase of five percentage points from last October.

   Business travelers' and leisure travelers' opinions differ 
        on the new security measures. Among frequent business 
        travelers, only 60 percent think that the new measures are 
        sufficient, versus 74 percent of frequent leisure travelers.

   Nearly four out of every five (79 percent) frequent business 
        travelers have received heightened security screening (i.e. a 
        ``pat down'' or removal of shoes).

   Just over one in five (21 percent) frequent business 
        travelers find security screening procedures very consistent 
        from airport to airport.

   More than one in ten travelers (11 percent) have canceled 
        their flights or fly less frequently because of the hassles of 
        airport security.

   Thirty-one percent of female business travelers who have 
        reduced their level of flying because of the hassles of 
        security have done so because of the personal ``intrusion from 
        security,'' compared to 12 percent overall. By contrast, of 
        male business travelers who have reduced their level of travel, 
        only 4 percent cited the intrusion of security as the reason.

    According to Tisch, while commercial airline travel is perceived to 
be very safe, the ``hassle-factor'' associated with heightened airport 
security, a lack of confidence in the sufficiency of the airport 
security measures and inconsistencies in the screening process from one 
airport to another confirm a recent trend by travelers to make trips by 
car instead of airplane. The percentage of those who view automobiles 
as the safest place to be has risen from 69 percent last October to 76 
percent.
    Among the survey's other results:

   Of those who say they are traveling more now than a year 
        ago, 45 percent say they are more inclined to book their travel 
        online, either through the airline directly or via an 
        independent travel site such as Orbitz (versus 20 percent who 
        say they are less inclined).

   Of those who purchase travel online, 21 percent use an 
        independent website versus 17 percent who book directly via the 
        airline website.

   Twenty-nine percent of travelers are less inclined to take 
        an international trip since the events of September 11. Almost 
        one in ten (nine percent) have delayed, postponed or canceled 
        an international trip. The number is even higher among male 
        business travelers, of whom 16 percent have canceled an 
        international trip.

   Nearly one in four (23 percent) travelers who are less 
        inclined to take an international trip say they would rather 
        travel in the U.S. and support the domestic economy.

   Travelers are more inclined to visit Washington, DC or New 
        York City now than they were a year ago. Seventy-six percent of 
        travelers surveyed said they would not avoid a trip to 
        Washington, DC and 75 percent said they would not avoid a trip 
        to New York City, an improvement over last year of seven 
        percentage points and four percentage points respectively.

   Fifty-eight percent of travelers are closely watching the 
        debate over the future World Trade Center Memorial and 75 
        percent plan to visit it.

   A majority (68 percent) of frequent business travelers say 
        the travel industry response to the events of September 11 was 
        ``better than expected,'' while nearly one in four say the 
        industry response was ``worse than expected.'' Comparatively, 
        74 percent of all travelers said the industry responded 
        ``better than expected.''

    ``One year later, the tragic events of September 11 continue to 
impact the travel and tourism industry,'' said Tisch. ``The industry 
has responded, and we are seeing promising signs that reaffirm the 
progress being made. Clearly, more needs to be done, and the industry 
and government should continue to work collaboratively to find 
solutions that will get more Americans traveling, and spur more 
international travelers to visit the U.S.''
    The survey was commissioned by Orbitz and conducted on behalf of 
the Travel Business Roundtable in conjunction with NYC & Company and 
the Washington Convention and Tourism Corporation by Penn, Schoen, 
Berland and Associates on August 14 and 15. The survey had a sample 
size of 700 respondents (margin of error +/- 3.8 percent). The sample 
was broken in equivalent groups of business and leisure travelers. This 
is the third wave of the survey that seeks to track changing traveler 
attitudes in the aftermath of the September 11 terrorist attacks. The 
first and second waves were conducted in October 2001.
About TBR:
    The Travel Business Roundtable is a CEO-based organization 
representing all sectors of the travel and tourism industry, including 
major airlines, hotels and lodging, restaurants, retail outlets, travel 
management companies, car rental companies, financial services 
institutions and others. The roster of members reflects the 
interdependence of all sectors of the travel and tourism industry and 
demonstrates the need to work collaboratively, especially during these 
challenging times.
About Orbitz:
    Orbitz is a leading online travel company offering consumers the 
largest selection of low airfares, as well as deals on lodging, car 
rentals, cruises, vacation packages and other travel. Orbitz' state-of 
the-art flight search engine searches more than 455 airlines--up to 2 
billion flight and fare options--offering an unbiased and comprehensive 
list of airfares and schedules. Founded by the world's leading 
airlines--American (AMR), Continental (CAL), Delta (DAL), Northwest 
(NWAC) and United (UAL) airlines--Orbitz also offers consumers a large 
collection of discounted web-only air fares. For more information, 
visit www.orbitz.com.
About WCTC:
    The Washington, DC Convention and Tourism Corporation serves as the 
lead organization to successfully manage and market Washington, DC as a 
premier global convention, tourism and special events destination. 
Through successful development and execution of centralized and 
cohesive sales and marketing strategies, the WCTC generates economic 
benefits to the citizens of the District of Columbia, the convention 
and tourism industry, stakeholders and the Washington Convention Center 
Authority, with a special emphasis on the arts, cultural and historical 
communities.
    The private, non-profit corporation has a membership of nearly 
1,000 businesses and organizations that support the travel and tourism 
industry in our nation's capital. The city's tourism industry generates 
more than $10 billion in direct spending each year and sustains 260,000 
jobs.
    The Washington, DC Convention and Tourism Corporation was 
established by business and community leaders in April 2001 by merging 
the Washington, DC Convention and Visitors Association and the DC 
Committee to Promote Washington.
About NYC & Company:
    NYC & Company, the city's official tourism marketing agency, is a 
private, non-profit membership organization dedicated to building New 
York City's economy and positive image through tourism and convention 
development, major events and the marketing of the city on a worldwide 
basis.
    Check out NYC & Company's new web site at www.nycvisit.com.

    Senator Dorgan. Mr. Tisch, thank you very much.
    Next we will hear from Mr. Fred Lounsberry, National Chair 
of the Travel Industry Association of America. Mr. Lounsberry, 
why don't you proceed.

 STATEMENT OF FRED LOUNSBERRY, NATIONAL CHAIR, TRAVEL INDUSTRY 
                     ASSOCIATION OF AMERICA

    Mr. Lounsberry. Thank you. Mr. Chairman and Members of the 
Subcommittee, on behalf of the 2000-plus member organizations 
of the Travel Industry of America, I want to thank you for the 
opportunity to update this Subcommittee on the state of the 
travel and tourism industry.
    Last October, our industry shared with you the devastating 
impact on our employees of the terrorist attacks of September 
11th, 2001. The sudden and dramatic decline in air travel 
rippled out to hurt all segments of the industry, including 
hotels, restaurants, rental car companies, and my business, 
theme parks and resorts.
    We are grateful that so many of you cosponsored legislation 
embodying our proposed industry relief plan. Unfortunately, for 
reasons beyond our collective control, that legislation did not 
become law, and many of our former employees are still without 
jobs or are working significantly fewer hours.
    Today I want to describe the current state of our industry 
one year later and suggest how you might help our industry 
share American values abroad, generate jobs, increase tax 
receipts, and help our Nation compete for international 
visitors in the future. We hope you will step forward, as you 
did last year, to help us.
    One year later, our industry's situation has improved but 
recovery is neither full nor complete. Auto travel and travel 
by recreational vehicles have been leading positive indicators 
as Americans have expressed more interest in family travel and 
staying closer to home.
    Domestic air travel recovery, however, has stalled. In the 
first half of 2002, enplanements were down 10 percent over the 
previous year. Business and convention travel was down nearly 9 
percent in the first 6 months of 2002.
    But the most affected segment by far has been international 
travel. In 2001, overseas travel to the U.S. declined 15 
percent overall.
    Travel industry employment has been affected dramatically. 
From September to December of 2001, TIA estimates that more 
than 270,000 travel industry employees lost their jobs. From 
December 2001 to July 2002, an additional 47,000 jobs were lost 
in our industry.
    The single biggest obstacle to a full and complete recovery 
of our industry is the loss of international travelers to the 
United States. In 2001, international travelers spent $72.3 
billion here and an additional $17.7 billion on transactions 
with U.S. air carriers. These expenditures directly generated 1 
million jobs and more than $12 billion in tax revenue for 
Federal, State, and local governments, including the income tax 
of industry workers who are employed because of international 
visitors.
    These economic benefits are not limited to any specific 
region of the country. In fact, one-third of international 
visitors visit two or more States, 28 percent visit small 
towns, and 21 percent tour the countryside. One-fifth of all 
international visitors spend time at national or State parks.
    Bringing international travel levels back to the record-
setting levels of the year 2000 will help replace the 320,000 
jobs that have been lost since September 2001 and generate tax 
revenue for governments that are struggling with deficit 
budgets.
    Yet, we should not be satisfied with the return to 2000 
levels of inbound international travel. Our country's market 
share of world arrivals has decreased 28 percent in the last 10 
years. The United States is no longer the world's premier 
destination. We are third behind France and Spain. We continue 
to lose share in five of the six world's largest tourist 
markets and continue to miss opportunities to share American 
values abroad.
    The United States is the only western industrialized nation 
without a unified national tourism campaign that reaches out to 
global visitors and encourages them to see America. Our travel 
and tourism industry is asking Congress to join with us in 
exploring ways to brand, position, and promote the United 
States as the premier travel destination in the world. We are 
prepared to match Federal dollars on a one-for-one basis.
    This idea has been unanimously endorsed by TIA's board of 
directors, the National Council of State Tourism Directors, and 
the National Council of Destination Organizations. 
Additionally, this year the Southern and Western Governors 
Associations have called on the Federal Government to fund a 
sustained international advertising and marketing program that 
encourages travel to the United States.
    We encourage the Members of this Subcommittee to support 
exploration of a public-private partnership to promote travel 
to the United States. Our industry needs to regain the 
international visitors that have been lost in the past decade 
and reverse the decline of visitors since September 11th, 2001. 
Our Nation needs to replace the jobs and tax revenue that have 
been lost. Our industry looks forward to working with you on 
legislation to achieve this goal.
    This concludes my testimony, Mr. Chairman, and I look 
forward to answering any questions you may have.
    [The prepared statement of Mr. Lounsberry follows:]

Prepared Statement of Fred Lounsberry, National Chair, Travel Industry 
                         Association of America

    Mr. Chairman and Members of the Subcommittee:
    On behalf of the 2,100 member organizations of the Travel Industry 
Association of America, or TIA, I want to thank you for providing me 
with this opportunity to update this Subcommittee on the state of the 
travel and tourism industry. I am TIA's National Chair as well as 
Senior Vice President, Sales, for Universal Parks and Resorts.
    Last October, TIA was privileged to present a witness to share with 
you our concerns about the devastating impact on our industry and on 
our employees of the terrorist attacks of September 11, 2001. As you 
will recall, our industry was struggling badly. Business had dropped 
off 35 percent in the month following the terrorist attacks, with the 
sudden and dramatic decline in air travel rippling out to hurt all 
segments of the industry, including hotels, restaurants, rental car 
companies and--my business--attractions and amusement parks.
    At your last hearing, our industry asked for help. We were grateful 
that so many of you cosponsored legislation embodying our proposed 
industry relief plan and other measures aimed at helping keep our 
employees on the job. For reasons beyond our collective control, 
however, the legislation did not become law, and the economy has not 
fully recovered. As a result, many of our former employees are still 
without jobs or are working significantly fewer hours.
    Today, I want to describe the current state of our industry and to 
suggest how you might help our industry share American values abroad, 
generate jobs, increase tax receipts, and help our nation compete for 
international visitors in the future. In short, our industry has 
coalesced around the notion of a public-private partnership that would 
promote travel to and within the United States for the benefit of every 
state in the union. We need your support, and hope you will step 
forward as you did last year to help us. Working together, we can 
persuade more visitors to visit the United States for the benefit of 
the country as a whole.

One Year Later
    One year later, our industry's situation has improved, but recovery 
is neither full nor complete. Most of our progress has been made in 
domestic leisure travel. Auto travel and travel by recreation vehicles 
have been leading positive indicators, as Americans have expressed more 
interest in family travel and staying closer to home. Lower gas prices 
and a shift away from air travel have reinforced these trends.
    Domestic air travel recovery, however, has stalled. In the first 
half of 2002, enplanements were down 10 percent over the previous 
year's numbers, according to the Air Transport Association. Airlines 
continue to struggle financially, grappling with enticing customers 
back to the skies while managing to reverse the trend of red ink.
    Business and convention travel, which was down 3 percent in 2001, 
was down nearly 9 percent in the first six months of 2002. Corporations 
continue to trim expenses in order to stay profitable in these 
precarious economic times, and travel continues to bear the burden of 
this trend. Hotel occupancy is improving slightly each month, but 
occupancy rates in the first two quarters of 2002 have still been lower 
than they were one year ago.
    But the most affected segment by far has been international travel. 
In 2001, overseas travel to the U.S. declined 15 percent overall, 
according to the U.S. Department of Commerce. The United States saw 
even more dramatic drops in visitors from key markets such as Japan, 
where travel slipped 18.5 percent; Brazil, where inbound U.S. travel 
declined 22.7 percent; and Germany, which posted a 24.6 percent drop. 
Industry analysts do not predict that international travel to the U.S. 
will catch up to 2000 levels until 2004.
    This disturbing trend, combined with the struggling domestic air 
market and the decline in business travel, has affected travel industry 
employment dramatically. From September to December of 2001, travel 
employment declined significantly. Based on data from the Bureau of 
Labor Statistics, TIA estimates that more than 273,000 employees 
working directly for the travel industry lost their jobs during this 
time.
    Unfortunately, 2002 is shaping up to be even worse overall than 
2001. The first eight months of 2001 showed positive job growth, so the 
overall trend for the year was flat. However, from December 2001 to 
July 2002, an additional 47,000 jobs were lost in our industry. While 
travel industry employment levels have stabilized in the past six 
months, they are still almost four percent lower than the same months 
of the previous year. With no positive growth yet this year and none 
indicated for the coming months, 2002 is likely to show a significant 
decline.

Reversing These Trends
    The single biggest obstacle to a full and complete recovery of our 
industry is the loss of international travelers to the United States. 
You may wonder why this segment is so important. The numbers speak for 
themselves.
    The average international traveler spends an average of 15.6 nights 
and more than $1,600 in our country. In 2001, international visitors 
spent $72.3 billion here and an additional $17.7 billion on 
transactions with U.S. air carriers. These expenditures directly 
generated 1 million jobs. One out of every eight travel industry 
employees is working because of international visitors.
    International travel to the United States does more than generate 
jobs; it is a revenue source for federal, state and local governments. 
According to TIA, international travelers directly generated more than 
$12 billion in tax revenue in 2001, including income tax of those 
industry workers who are employed because of international visitors.
    These economic benefits are not limited to any specific region of 
the country. International visitors see all parts of our nation. One-
third of international travelers visit two or more states. Thirty-one 
percent visit historical places. Twenty-eight percent visit small 
towns, and 21 percent tour the countryside. One-fifth of all 
international visitors spend time at national or state parks. The 
impact of international travel is felt through the United States.
    Bringing international travel levels back to the record-setting 
levels of the year 2000 will help replace the 320,000 jobs that have 
been lost since September 2001 and generate tax revenue for governments 
that are struggling with deficit budgets during these difficult 
economic times.

Going Even Further
    Yet, we should not be satisfied with a return to 2000 levels of 
inbound international travel. In the past decade, our country has been 
losing market share of world travelers. While total outbound travel 
worldwide has increased 49 percent since 1991, arrivals to the U.S. 
have increased by only 7 percent. Our country's market share of world 
arrivals has decreased 28 percent in the past ten years.
    The United States is no longer the world's premier destination; we 
are third, behind France and Spain. We continue to lose share in five 
of the world's six largest tourist markets. We are being outpaced by 
other countries who are promoting themselves aggressively to the 
growing world tourism market.
    Increasing our share of international visitors would have tangible 
economic benefits. Adding just one percentage point to the 2001 U.S. 
market share of world arrivals would result in an additional 7 million 
international visitors, an additional $11 billion in expenditures in 
our country and the creation of 151,000 more travel industry jobs.
    Such growth would benefit U.S. governments as well. Adding one 
percentage point to the 2001 U.S. market share of world arrivals would 
generate an additional $1.9 billion in tax revenue for federal, state 
and local governments, including income tax. It's easy to see why our 
industry is so focused on the international market.

Growing Travel to the U.S.
    As travel continues to grow worldwide, other countries continue to 
increase their market share of worldwide travel. While some of this 
shifting is inevitable as former communist bloc countries enter the 
travel and tourism business, much of it is attributable to the success 
of sophisticated, aggressive marketing campaigns undertaken by 
governments that understand the economic value of promoting in-bound 
travel.
    The United States is the only western, industrialized nation 
without a unified national tourism campaign that reaches out to global 
visitors and encourages them to see America. The most recent report of 
the World Tourism Organization provides information about national 
tourism offices worldwide. Here are a few snapshots of the 1997 budgets 
of our competitors:

   Australia--$87.5 million
   France--$58.2 million
   New Zealand--$32.8 million
   Brazil--$92.3 million
   Germany--$26.6 million
   Mexico--$103.2 million
   Spain--$147.0 million

    As you can see, we face stiff competition in the global 
marketplace. Other countries have recognized the value of international 
travelers, and they are growing their market shares while our share is 
declining. In order to increase our share of worldwide travelers, the 
United States needs to engage in a tourism promotional campaign.

Successful Models
    Our travel and tourism industry is asking the Federal Government to 
help our industry market the U.S. internationally. As an industry, we 
have long recognized the benefits of leveraging marketing dollars, and 
there are several successful models in our own country that could serve 
as examples of how to structure a national tourism marketing campaign.
    The State of Florida created VISIT FLORIDA, a public-private 
promotional effort designed to create a unified brand for the state. I 
am the immediate past chair of VISIT FLORIDA's private sector board of 
directors, which oversees the work of this non-profit organization. The 
state of Florida contributes dollars for marketing initiatives, and 
those dollars are matched one-for-one by the private sector. In this 
way, the state is able to generate more in advertising value from its 
investment of public funds. The state of California has a similar 
marketing effort. Indeed, combining public and private sector dollars 
for tourism marketing purposes is common throughout the world.
    Our industry has already implemented a demonstration campaign, 
which was developed and administered by TIA. SeeAmerica is our 
industry's brand, and SeeAmerica.org is the website that consumers can 
use to make travel plans. The SeeAmerica name and logo are used at all 
major international tourism trade shows, such as ITB in Berlin and JATA 
in Japan. Travel guide inserts in major UK Sunday newspapers utilized 
the SeeAmerica name, as did a subway advertising train campaign in 
Japan.
    These and other projects and programs have been paid for by 225 
separate industry sources, including state and local tourism 
organizations and private-sector companies, and they show the 
willingness of our industry to put up matching dollars for a broader 
federal campaign. They also demonstrate the success of the SeeAmerica 
brand, which has been used by individual travel and tourism companies 
in their own advertising efforts.

What our Industry is Asking
    As we seek to rebuild our industry and to create jobs, our industry 
now asks that Congress will help us build on the success of these 
programs by joining us in exploring ways to brand, position and promote 
the United States as the premier travel destination in the world. Our 
industry encourages that, like the Florida model, any organization be 
managed by the private sector.
    This idea has been unanimously endorsed by TIA's Board of 
Directors, which represents all segments of the industry from all 
regions of the country. The National Council of State Tourism Directors 
and the National Council of Destination Organizations have passed 
resolutions supporting this proposal. Additionally, this year, the 
Southern and Western Governors Associations have called on the Federal 
Government to provide a sustained, federally funded international 
advertising and marketing program that encourages travel and tourism to 
the United States.
    We encourage the Members of this Subcommittee to support 
exploration of a public-private partnership for promoting travel to the 
United States. This is our industry's best hope of regaining the 
international visitors that have been lost in the past decades and 
reversing the decline of visitors since September 11, 2001. This is our 
nation's best hope for replacing the jobs and tax revenue that have 
been lost. And it offers a way for our nation to share our values with 
individuals throughout the world. Our industry looks forward to working 
with you on legislation to achieve this goal.
    Mr. Chairman, I appreciate the opportunity to testify today, and I 
look forward to answering any questions you may have.
    Thank you.

    Senator Dorgan. Mr. Lounsberry, thank you very much.
    Finally, we will hear from Ms. Noel Hentschel, the 
Chairwoman and CEO of AmericanTours International. Why don't 
you proceed.

    STATEMENT OF NOEL IRWIN HENTSCHEL, CHAIRMAN AND CEO OF 
                  AmericanTours INTERNATIONAL

    Ms. Hentschel. Thank you, Mr. Chairman and Ranking Member 
Fitzgerald and Members of the Subcommittee. Thank you for the 
opportunity to testify.
    And I concur with Senator Fitzgerald that we need to be 
more aggressive.
    I am Noel Irwin Hentschel, Chairman and CEO of 
AmericanTours International, ATI, which I co-founded 25 years 
ago with the specific mission of promoting tourism to and 
within the United States of America. As the Nation's largest 
Visit USA tour operator, bringing more than 500,000 visitors 
each year from 70 countries to the United States, ATI is the 
only major Visit USA tour operator which is till American 
owned. We also promote all 50 States of America as a preferred 
partner of the American Automobile Association, AAA, by 
providing on-line travel services for their 46 million members 
domestically.
    The events of September 11th had a profound impact on the 
U.S. travel industry, with international tourism and overseas 
arrivals down 15 percent in 2001 over 2000. Some markets have 
suffered more drastic drops in passenger arrivals than others, 
with the United Kingdom down 11 percent, France down 14 
percent, Japan down 19 percent, Italy down 21 percent, and 
Germany down 25 percent to the United States. According to the 
Department of Commerce, the total international receipts for 
travel expenditures and passenger fares were down 12 percent, 
for a loss of $11.9 billion from 2001 versus 2000, and 2002 
will reflect an even greater loss.
    While Americans are traveling around America, especially by 
car, they are moving dollars from one State to another. 
International travelers bring in new money.
    The challenges for tourism go beyond the tragedy of 
September 11th and it is time for America to take Visit USA 
tourism seriously.
    Travel and tourism generates more than $550 billion in 
total expenditures and 18 million jobs nationwide, which 
equates to 1 out of 7 people employed in the private sector. 
Visit USA international travel and tourism alone generated $90 
billion in expenditures and was responsible for 1 million jobs 
nationally. As a service export, international travel and 
tourism provided a positive balance of trade in 2001 of $7.7 
billion.
    But it seems that the Government of the United States does 
not take tourism seriously. We have had a severe lapse in 
policy on tourism in America, and we are paying the price. We 
are paying the price economically but also politically.
    America needs to market and promote the United States as a 
destination. America spends zero dollars on promotion and yet 
Cyprus spends $40 million and Thailand spends more than $100 
million annually to promote travel to their countries.
    Exactly one year ago, I met with Secretary Don Evans and 
other leaders of our industry and recommended that instead of 
bailouts, the United States needs to allocate $100 million 
immediately to market and promote America as a destination. 
This can be done in joint marketing with TIA, States that have 
individual tourism budgets, and with tour operators overseas 
who could provide matching funds. We need to be proactive and 
to create a demand for travel to the United States. Not only 
will this contribute positively to our economy and our 
employment rate, but it will also have a positive impact on our 
balance of trade.
    We should ask the Office of Global Communication to work 
with CNN, CNBC, and others to provide PSA's in cooperation with 
our tourism industry to invite and encourage people to travel 
to America by showcasing different attractions from Broadway to 
the Grand Canyon to Branson, Missouri, to Waikiki Beach. Many 
of you will remember years ago when New York had the ``I Love 
New York'' campaign. We need to launch a similar ``I Love 
America'' campaign worldwide, and we have the celebrity power 
to deliver this message.
    Since September 11th, I have traveled extensively to Europe 
and to Asia, and I have met with the tour operators. While they 
are cautiously optimistic of 2003, they all feel very strongly 
that the United States needs to be more proactive in promotion. 
They are also concerned about the U.S. dollar versus the euro 
and the timing of any potential conflict with Iraq so that it 
doesn't impact the main booking season.
    Most countries have a ministry of tourism. We need to 
create a national tourism office and provide them with a budget 
for marketing and promoting America throughout the world. If 
Malaysia spends $42 million and Australia spends $87 million, 
how can we expect to compete and spend nothing?
    Not only will increasing international tourism have a 
positive economic impact, but also a positive political impact. 
What better way for people from around the world to have a 
constructive view of America than to visit the Grand Canyon, 
Mount Rushmore, and the Grand Ole Opry? When international 
visitors fall in love with the beauty of our country and the 
friendliness of our people, they become our greatest 
ambassadors and they take their personal stories from their 
American experience. Tourism generates literally millions of 
goodwill ambassadors spreading a positive image of our country 
abroad.
    In addition to spending money to promote tourism, we need 
to protect the U.S. tourism industry. We need to level the 
playing field with the foreign companies doing business in 
America. Tour operators from Europe or Asia need to operate 
legally, and our laws need to be enforced. American companies 
that pay taxes and operate within the law should not be 
penalized or driven out of business because of unfair and 
illegal business practices by foreign-owned companies.
    Unfortunately, we are too often viewed internationally as a 
society where our laws are not enforced. The U.S. travel 
industry needs enforcement to stem the tide of billions of 
dollars that are flowing overseas each month. Thousands of U.S. 
workers are being unemployed every day because the INS, the 
Department of Labor, and the IRS are not enforcing our laws 
with foreign corporations doing business in America. Often 
viewed on the surface as bringing visitors into the United 
States and therefore presumed to benefit the economy, some 
foreign tour operators instead host an underground economy that 
undermines a myriad of U.S. laws while unfairly competing with 
all law-abiding companies.
    We must level the playing field and protect our U.S. 
companies. We need to hold foreign corporations and foreign 
CEO's doing business in America to the same standards that we 
hold American corporations and American CEO's. Foreign entities 
should not be able to hide profits off shore through non-U.S. 
subsidiaries, transfer pricing, or predatory pricing. A recent 
article that I have attached from Touristic Report in Germany 
exposes an example of this activity.
    Second, foreign tour operators need to be forced to abide 
by U.S. labor laws. Tour guides performing labor in the United 
States should be required to be authorized to work in the 
United States. Tour guides without authority to work in the 
U.S. should be promptly deported.
    Third, foreign entities should not receive windfall tax 
breaks or special treatment for tax evasion because collection 
efforts may be viewed as harder. Companies illegally evading 
taxes or who have received substantial compromises should be 
required to pay income tax on the amounts discharged.
    And finally, companies who charge consumer taxes on travel 
transactions, but never remit these amounts to the respective 
taxing authorities, should be charged with fraud and prosecuted 
to the full extent allowed by law. As an example, foreign-owned 
operators in New York City have been claiming for the past 5 
years that they are permanent residents of the hotels they 
contract. They do this in order to evade the payment of hotel 
occupancy taxes, which they fraudulently collect from the 
consumer. The wrongful retention of taxes has been a multi-
million dollar windfall to these foreign operators who are 
billion dollar foreign corporations. This unfair competition 
has driven American law-abiding companies out of the market and 
into bankruptcy.
    Stem the tide of foreign tour operators illegally operating 
tours in the United States and you will add billions to the 
U.S. treasury and thousands of jobs. Enforcement action will 
not decrease visitors but will increase revenues to both 
Federal and State governments as overseas operators are forced 
to legally record their transactions, and American companies 
will, once again, be able to compete.
    In the materials I have submitted, I have provided 10 ways 
to help the industry by enforcing laws of this great land. * We 
hope you will help motivate the Department of Justice, the INS, 
and the State and local governments to take action now before 
there are no more American owned visit USA tour operators.
---------------------------------------------------------------------------
    * The information referred to has been retained in Committee files.
---------------------------------------------------------------------------
    There is a significant cost to be paid if we do not protect 
our U.S. tourism industry and aggressively promote the United 
States of America as the greatest and most diverse travel 
destination in the world. On the other hand, there is 
significant political and economic benefit to be gained if we 
can begin to take tourism seriously in America and provide the 
funds needed to compete as an international travel destination.
    Mr. Chairman, tourism is an enormous source of revenue and 
an enormous opportunity of political influence. Our 
Government's policies of not supporting this critical industry 
will potentially cost billions of dollars and scores of 
thousands of jobs. It will also deny foreigners a chance to see 
the real America and to go home and confront growing anti-
Americanism. On tourism, the train is leaving the station very 
quickly. I urge your Committee to act aggressively and to put 
tourism on the front burner of commercial policy.
    Thank you very much.
    [The prepared statement of Ms. Hentschel follows:]

     Prepared Statement of Noel Irwin Hentschel, Chairman and CEO, 
                      AmericanTours International

    Mr. Chairman and Members of the Subcommittee, thank you for the 
opportunity to testify.
    I am Noel Irwin Hentschel, Chairman and CEO of AmericanTours 
International (ATI), which I co-founded 25 years ago with the specific 
mission of promoting tourism to and within the United States. As the 
nation's largest visit USA tour operator, bringing more than 500,000 
visitors to the United States annually from 70 countries, All is the 
only major Visit USA tour operator, which is still American owned. We 
also promote all 50 states of America as a preferred partner of the 
American Automobile Association (AAA) by providing online travel 
services for their 46 million members domestically.
    The events of September 11 had a profound impact on the U.S. travel 
industry with international tourism and overseas arrivals down 15 
percent in 2001 over 2000. Some markets have suffered more drastic 
drops in passenger arrivals than others with the United Kingdom down 11 
percent, France down 14 percent, Japan down 19 percent, Italy down 21 
percent and Germany down 25 percent. According to the Department of 
Commerce, the total international receipts for travel expenditures and 
passenger fares were down 12 percent for a loss of 11.9 billion dollars 
from 2001 versus 2000 and 2002 will reflect an even greater loss. But 
the challenges for tourism go beyond the tragedy of September 11 and it 
is time for America to take tourism seriously.
    Travel and tourism generates $545 billion in total expenditures and 
18 million jobs nationwide, which equates to one out of seven people 
employed in the private sector. Visit USA international travel and 
tourism alone generated $90 billion in expenditures and was responsible 
for over one million jobs nationally. As a service export, 
international travel and tourism provided a positive balance of trade 
in 2001 of 7.7 billion dollars.
    But it seems that the government of the United States does not take 
tourism seriously. We have had a severe lapse in policy on tourism in 
America and we are paying the price. We are paying the price 
economically but also politically.
    America needs to market and promote the United States as a 
destination. America spends zero dollars on promotion and yet Cyprus 
spends over $40 million and Thailand spends over $100 million annually 
to promote travel to their countries.
    Exactly one year ago today, I met with Secretary Don Evans and 
other leaders of our industry and recommended that instead of bailouts, 
the U.S. needs to allocate $100 million immediately to market and 
promote America as a destination. This can be done in joint marketing 
with TIA, States that have individual tourism budgets and with the tour 
operators overseas who could provide matching funds. We need to be 
proactive and to create a demand for travel to the USA. Not only will 
this contribute positively to our economy and employment rate, but it 
will also have a positive impact on the balance of trade. We should ask 
the office of Global Communication to work with CNN, CNBC and others to 
provide PSA's in cooperation with our tourism industry to invite and 
encourage people to travel to America by showcasing different 
attractions from Broadway to the Grand Canyon to Waikiki Beach. Many of 
you will remember that years ago New York launched an ``I Love New 
York'' campaign. We need to launch a worldwide ``I Love America'' 
campaign and we have the celebrity power to deliver this message.
    Since September 11, I have traveled extensively to Europe and Asia 
to meet with tour operators. While they are cautiously optimistic for 
2003, they all feel strongly that the U.S. needs to be more proactive 
in promotion. They are also concerned about the U.S. dollar versus the 
Euro and the timing of any potential conflict with Iraq so that it 
doesn't impact the main booking season.
    Most countries have a Minister of Tourism. We need to create a 
National Tourism Office and provide them with a budget for marketing 
and promoting America throughout the world. If Malaysia spends $42 
million and Australia spends $87 million, how can we expect to compete 
as an international destination and spend nothing?
    Not only will increasing international tourism have a positive 
economic impact but also a positive political impact. What better way 
for people around the world to have a constructive view of America than 
to visit the Grand Canyon, Mount Rushmore or the Grand Ole Opry? When 
international visitors fall in love with the beauty of our country and 
the friendliness of our people, they become our greatest ambassadors 
with personal stories about their American experience. Tourism 
generates literally millions of goodwill ambassadors spreading a 
positive image of our country abroad.
    In addition to spending money to promote tourism, we also need to 
protect the U.S. Tourism Industry.
    We need to level the playing field with the foreign companies doing 
business in America. Tour operators from Europe or Asia need to operate 
legally and our laws need to be enforced. American companies, that pay 
taxes and operate within the law, should not be penalized or driven out 
of business because of unfair and illegal business practices by foreign 
owned companies.
    Unfortunately, we are too often viewed internationally as a society 
where our laws are not enforced. The U.S. Travel Industry needs 
enforcement to stem the tide of losses of billions of dollars that are 
flowing overseas each month. Thousands of U.S. workers are being 
unemployed every day because the INS, Department of Labor and the IRS 
are not enforcing our laws with foreign corporations doing business in 
America. Often viewed on the surface as bringing visitors into the 
United States and therefore presumed to benefit the economy, some 
foreign tour operators instead host an underground economy that 
undermines a myriad of U.S. laws while unfairly competing with all law 
abiding companies.
    We must level the playing field and protect our U.S. companies. We 
need to hold foreign corporations and foreign CEO's doing business in 
America to the same standards that we hold American corporations and 
American CEO's. Foreign entities should not be able to hide profits 
offshore through non-U.S. subsidiaries, transfer pricing or predatory 
pricing. A recent article that I have attached from Touristic Report in 
Germany exposes an example of this activity.
    Second, foreign tour operators need to be forced to abide by U.S. 
labor laws. Tour guides performing labor in the U.S. should be required 
to be authorized to work in the U.S. Tour guides without authority to 
work in the U.S. should be promptly deported.
    Third, foreign entities should not receive windfall tax breaks or 
special treatment for tax evasion because collection efforts may be 
viewed as harder. Companies illegally evading taxes or who have 
received substantial compromises should be required to pay income tax 
on the amounts discharged.
    Finally, companies who charge consumer taxes on travel transactions 
but never remit these amounts to the respective taxing authorities 
should be charged with fraud and prosecuted to the full extent allowed 
by law. As an example, foreign owned operators in New York City have 
been claiming for the past five years that they are ``permanent 
residents'' of the hotels which they contract. They do this in order to 
evade the payment of hotel occupancy taxes, which they fraudulently 
collect from the consumer. The wrongful retention of taxes has been a 
multi-million dollar windfall to these foreign operators who are 
billion dollar foreign corporations. This unfair competition has driven 
American law-abiding companies out of the market and into bankruptcy.
    Stem the tide of foreign tour operators illegally operating tours 
in the United States and you will add billions to the U.S. treasury and 
thousands of jobs. Enforcement action will not decrease visitors but 
will increase revenues to both federal and states governments as 
overseas operators are forced to legally record transactions, hire U.S. 
and documented workers and pay taxes in the U.S.. American companies 
will once again be able to compete with foreign operators who have 
unabashedly operated unhampered by U.S. laws and regulations.
    In the materials I have submitted I have provided ten ways to help 
the industry now by enforcing the laws of this great land. * We hope 
you will help motivate the Department of Justice, INS and State and 
local governments to take action now before there are no more American 
owned Visit USA Tour Operators.
---------------------------------------------------------------------------
    * The information referred to has been retained in Committee files.
---------------------------------------------------------------------------
    There is a significant cost to be paid if we do not protect our 
U.S. tourism industry and aggressively promote the United States of 
America as the greatest and most diverse travel destination in the 
world. On the other hand, there are significant political and economic 
benefits to be gained if we can begin to take tourism seriously in 
America and provide the funds needed to compete as an international 
travel destination.
    Mr. Chairman, tourism is an enormous source of revenue and an 
enormous opportunity of political influence. Our government's policies 
of not supporting this critical industry will potentially cost billions 
of dollars and scores of thousands of jobs. It will also deny 
foreigners a chance to see the real America, and to go home and 
confront growing anti-Americanism. On tourism, the train is leaving the 
station very quickly. I urge your Committee to act aggressively to put 
tourism on the front-burner of commercial policy.
    Thank you, Mr. Chairman.

    Senator Dorgan. Thank you very much Ms. Hentschel.
    Senator Fitzgerald?
    Senator Fitzgerald. I would be interested in the thoughts 
of others on the panel regarding Ms. Hentschel's suggestion 
that we spend $100 million--I think that was your figure--to 
promote tourism. Is it correct that the Federal Government does 
not spend any money advertising for tourism abroad?
    Ms. Hentschel. Zero.
    Senator Fitzgerald. Private interests would spend money on 
advertising, Correct?
    Mr. Lounsberry. That is correct. Currently the Federal 
Government does not support any type of a national tourism 
message. You have individual companies, airlines, theme parks, 
hotel chains promoting, but there is not a consistent USA----
    Senator Fitzgerald. And States promote come visit our 
State.
    Mr. Lounsberry. Correct, but there is not a national 
campaign on behalf of the United States.
    Senator Fitzgerald. Has anybody ever proposed one before? 
Has this come up before in Congress? Has it been voted on or 
defeated? Does anybody know the history of that?
    Mr. Tisch. Senator, right after the White House Conference 
on Travel and Tourism in 1995, which was the first opportunity 
for our industry to speak with a unified voice and which was 
very successful and allowed us to create organizations like the 
Travel Business Roundtable, there was congressional movement 
towards creating a national tourism organization. It was in 
place for about 2 years, and unfortunately, we were not able to 
find a correct funding mechanism for the public side of the 
public-private partnership.
    At the Travel Business Roundtable, we understand that there 
is a need to develop this partnership and come up with some 
dollars for international destination marketing. But we also 
know that anything we do has to be politically and economically 
feasible. So, the $100 million number in a perfect world would 
be a great place to start, but I am not sure that in today's 
world it is a realistic place to start.
    We are calling for some easy steps, some beginner steps 
working with the Commerce Department, and I do want to 
recognize Secretary of Commerce Evans and Linda Conlin on his 
team who have really focused on the needs of the travel and 
tourism industry working with the administration, working with 
Capitol Hill.
    But, for instance, there is a $2 million program called the 
Market Development Cooperator program, and a nonprofit 
organization can go and ask for loans up to $400,000. We want 
to do more of that kind of mining for business through the 
nonprofits and maybe take some of those dollars and really 
focus them on travel and tourism or do a pilot grant program in 
certain cities in certain States. Take five cities. Take 
Chicago. Take Fargo, North Dakota and come up with certain 
amounts of dollars and see what works. See what the best 
practices are. See where the successes are. But start small. 
Let us see how we can grow the industry. Let us see how we can 
work with Government and then look down the road to a $100 
million number.
    Senator Fitzgerald. One of the problems in promoting a 
Visit America program in other countries is we would have to 
decide which part of America we would advertise, unless we 
advertised such a broad cross section of America that nobody 
would get mad.
    Ms. Hentschel. A rising tide will lift all boats. So, the 
main thing is we need people to come to America first because 
right now they're choosing to go to South Africa, to Australia, 
to other parts of the world, even to Turkey. Turkey is sold out 
this year.
    Senator Fitzgerald. Do you think $100 million would do more 
overall for the tourism industry in America than the bailout 
that the airlines are asking for?
    Ms. Hentschel. Absolutely.
    Senator Fitzgerald. Does anybody disagree with that?
    Mr. Tisch. Well, the airlines are such an important factor 
in getting people from point A to point B.
    Senator Fitzgerald. Will the airlines no longer get people 
from point A to point B if they have to file bankruptcy and 
operate under Chapter 11?
    Mr. Tisch. That remains to be seen. If the airlines go out 
of business and fares go up----
    Senator Fitzgerald. Do you think the airlines will go out 
of business? You do not think they will just file for 
bankruptcy and eliminate their debts? Do you think they will go 
out of business?
    Mr. Tisch. Some may, but the Travel Business Roundtable 
supports a strong airline industry. Clearly we are in favor of 
this main mode of transportation. What we are seeing now is 
that people are finding ways around airlines. They are driving 
more.
    Senator Fitzgerald. But when an airline files bankruptcy, 
do their creditors not take the hit? U.S. Airways filed for 
bankruptcy. They are still fine. Are they not?
    Mr. Tisch. Yes, they are.
    Senator Fitzgerald. I mean, are we not really bailing out 
their shareholders?
    Ms. Hentschel. And from overseas, you cannot drive here. 
So, the key is we have to be able to promote, and if we do 
promotion and marketing, the people will come and that will 
mean that the flights will be full and then the airlines will 
not need the bailouts.
    Senator Fitzgerald. Mr. Rosenbluth, you were here last year 
after September 11th, were you not--after the airline bailout? 
I may have asked you this at that time, but I know your 
industry has been suffering greatly in the last couple of 
years, particularly the last year. Do you think that you have 
been losing a lot of your travel agents because they can no 
longer compete with Orbitz, which is owned by the airlines and 
is an indirect beneficiary of the taxpayer dollars?
    Mr. Rosenbluth. I do not think it is Orbitz or any other 
on-line agency, although there has been some market share shift 
to on-line travel sites.
    The problem with the travel agency industry per se is 
twofold.
    One is that there are just fewer people traveling now, 
partly economic, partly as a result of, I think, some 
uncertainty for the future.
    The other part is that the airlines, for the most part have 
systematically tried to remove certain segments of the travel 
agency industry in order to be able to deal directly with the 
public. One of the unintended results of their actions, 
however, is that now, having removed commissions from agencies, 
dealing directly with the public is the airline's most 
expensive form of distribution.
    I believe we need a very strong airline industry, but I 
believe that the airline industry can help themselves in a lot 
of ways. Now, I listened to some of the testimony yesterday 
over in the House where there was discussion about war risk 
insurance and things like that, and it will probably work its 
way over here and cockpit doors. I think those things are 
important.
    However, the airlines, it has been stated, will lose 
approximately $7 billion this year. I believe that a good $5 
billion is their own doing and that if the airlines were to 
reform the way they price, both on-line and off-line, then in 
fact----
    Senator Fitzgerald. You mentioned reform of their pricing. 
Do you think their pricing structure is just too complex with 
too many different fares? Do you think that hurts them?
    Mr. Rosenbluth. No. I think it is completely broken. It is 
not in the complexity. I think you can get airline reform 
without simplification.
    The problem with the airlines is self-inflicted. What they 
have been doing over the past number of years is indiscriminate 
discounting for major corporations. The way it works is very 
simple. They set a benchmark walk-up fare, which are the high-
yield fares that everybody talks about which the airlines say 
they are not getting those passengers anymore. They then 
discount the corporations off of that benchmark fare, 30, 40, 
50 percent. But in return for that, they are requesting or 
requiring corporations to move 40 percent, 60 percent, 70 
percent share to the airlines.
    What has happened because airlines have not had the 
backbone to go to corporations who are not fulfilling their end 
of the bargain is that tens of millions, if not hundreds of 
millions, of dollars a day are just going down the drain 
because major corporations that are doing their part, that are 
in fact moving the share and getting the discounts 
appropriately, are subsidizing other corporations that are not 
hitting their share numbers, and the airlines are not holding 
them to it.
    So, it is just as if you were to go out and order 30,000 
books and get a discount for that but only buy 3, you would get 
the same discount without every buying the other 29,997 books. 
So that is what is broken. That is where the money is going.
    Senator Fitzgerald. That is only some airlines, though. It 
is really the big six airlines. For Southwest and Jet Blue--
their traffic is up. Southwest's business I think, is up 100 
percent in the last year. Is that not correct?
    Mr. Rosenbluth. They have very different models, but those 
other airlines are not Jet Blue. They are not Southwest. But 
they are there. And, yes, the marketplace is taking care of 
some of the situations, as you mentioned, some of the 
bankruptcies, and there may be more, et cetera. But the 
shareholders do not have to lose if, in fact, you can have a 
profitable airline system. And the way to a profitable airline 
system is to change the airfare structure so that you don't 
have this disparity that is between the last minute walk up 
fare, of which many do not even fly anymore because the fares 
are too high, those that are good corporations subsidizing bad 
ones and the leisure traveler who is getting fares from a 
number of places, which is just confusing the entire 
marketplace.
    So, I think major airfare structure reform is necessary, 
and the airlines can see billions of dollars flow to their 
bottom line. Commerce would be better for it. Everyone at this 
table would be better for it. I do not believe it requires that 
the Government do any bailouts. I do think there is definite 
room to help with some of the security measures that have been 
imposed on the carriers, but there is some self-help that can 
be done here that will be beneficial to all.
    Senator Fitzgerald. Mr. Tisch, does the hotel industry 
support continued taxpayer money for the airlines?
    Mr. Tisch. I cannot speak on behalf of the hotel industry 
to answer your question, Senator. I can speak on behalf of the 
Travel Business Roundtable and that we support a strong 
airline----
    Senator Fitzgerald. Are the airlines members of that?
    Mr. Tisch. We have about 6 airlines that are members of the 
Travel Business Roundtable. We are not the ones causing any red 
ink paying their dues to us. I guarantee you.
    We call for a strong airline industry. It is an integral 
part of the travel and tourism industry. It is a major employer 
in this country. The issues are very complicated. We just want 
to see a strong, profitable system that will get our travelers 
from point A to point B.
    It is important to keep in mind that business travel is way 
down. That is one of the significant anchors on the travel and 
tourism industry right now, and that is why we are calling for 
other ways to stimulate travel. Let us increase the amount of 
business meals deduction to 100 percent. Let us reinstitute a 
spousal travel deduction so that two people are going on a 
trip, two people are staying in a hotel room, two people are 
eating at a restaurant, two people are visiting theme parks, 
and two people are shopping. It is those kinds of ideas that I 
think we can work together with Congress to explore how we get 
more people traveling.
    And when we call for the creation of a presidential 
advisory council on travel and tourism, we need a body where we 
can discuss these kinds of ideas and the whole notion of 
creating these public-private partnerships. It is working with 
the public sector that is going to get these ideas into action 
and get more people traveling.
    Senator Fitzgerald. I know Senator Dorgan wants to ask some 
questions.
    The business of hotels in major cities such as New York, 
Chicago, L.A., Washington, and the big hotels, is probably down 
substantially. But, I would imagine the smaller hotels, such as 
the Hampton Inn, the Courtyard by Marriott, and hotels along 
the interstate highways are probably doing pretty well right 
now because travel has shifted from airplane to automobile. Is 
that not correct?
    Mr. Tisch. Yes, Senator. What we are seeing is that across 
the board, market by market, it may vary. You look at New York 
City, you look at some of the bigger markets--San Francisco is 
unfortunately suffering quite a lot. Occupancies have remained 
about the same as last year. Our average rates are down 
anywhere from 10 to 15 to 20 percent depending on the 
particular market. We used price as a tool last year to get 
people out of their homes. Then the economy continued to 
soften, so we are unable to raise the prices in certain key 
markets. Because people are driving, certain roadside hotels, 
lower priced facilities are doing quite well.
    What we have been pleasantly surprised about is that the 
number of hotel/motel foreclosures is not as significant as we 
thought it might be. That is because in the last few years, to 
build a new property, to buy a hotel, the amount of equity 
needed was far in excess of what it was 10 years ago when the 
industry was in a similar bind. So, we are pleased that the 
basic economies of the hotel industry continue to remain 
strong. We have become much more productive. The breakeven 
point on a hotel is lower than it has ever been because we have 
gotten a little bit smarter about how to do things, but the big 
cities are hurting because business travel is off and meetings 
and conventions are off.
    Senator Fitzgerald. What is the room occupancy in New York 
right now?
    Mr. Tisch. We will end the year, Senator, at about 76 
percent, but our rate will be down about 15 percent over last 
year.
    Senator Fitzgerald. And over 2000?
    Mr. Tisch. In 2000, we were at about 84 percent with a much 
higher average rate.
    Senator Fitzgerald. Well, do you all agree on the 
importance of promoting the United States to the international 
travelers? One of your cited statistics suggests that 
international tourists are 19 percent of our tourists, but 
constitute 42 percent of tourist spending in the U.S.?
    Mr. Tisch. That was a New York City statistic.
    Senator Fitzgerald. That was a New York City statistic. So, 
if we could just have a slight increase in international 
tourists, that would really work wonders.
    Mr. Lounsberry. Yes. The international segment has been the 
most devastated this past year, and as we have talked about, 
our competition that has been taking market share away from the 
United States for the past 10 years has just been exacerbated. 
When you talk about tour operators internationally not seeing 
the U.S. market itself, they turn to the countries and 
destinations that are. It is up to the destination to create 
the awareness and the interest in traveling to that 
destination.
    Senator Fitzgerald. And this has happened even though our 
dollar has weakened vis-a-vis other major currencies in the 
last year. We had more foreign tourists when our dollar was 
stronger. Is that not correct, Ms. Hentschel?
    Ms. Hentschel. Well, yes and no, because tourism was 
starting to decline from Europe prior to September 11 because 
of the dollar becoming stronger. The programs are costed about 
a year or 18 months in advance for many of the European tour 
operators, so you do not really get the effect immediately. So, 
now with the dollar becoming on par with the euro, that will 
help for next year. And that is why there are cautiously 
optimistic, but it depends on other elements.
    Promotion is a key area. Actually we are viewed as almost 
embarrassing that the United States of America--like we do not 
care about visitors coming from overseas. As Fred just stated, 
other destinations are very aggressive. South Africa took over 
many of the taxicabs in London and painted their flag on it, 
telling everybody to come to South Africa. This kind of really 
helps, and that is what we need to do.
    Senator Dorgan. Let me ask a few questions. We had invited 
several people involved with destination resort attractions to 
be here, but did not have a witness from them. Mr. Tisch, what 
has been the experience, to the extent you know. You have a 
hotel near Universal in Florida. What has been the experience 
of Disney World, Disney Land, Universal, and so on?
    Mr. Tisch. Well, Senator, I can handle the hotel portion of 
that question because, as it turns out, we are partners with 
Universal in three hotels on the grounds of Universal Studios, 
the third one, a 1,000 rooms, having opened just 3 months ago.
    Our hotel experience is that we had a very good summer, and 
it is interesting to note because in our 1,000-room hotel, 
which was designed as about 75 percent group business, this 
summer we ran out of parking spaces. If you went in the parking 
lot, you would see cars from Florida, Alabama, Georgia, because 
people were driving to the destination. So, with the great 
marketing that our partners at Universal are able to 
accomplish, we had a very good summer.
    It is not necessarily the case in the whole destination--
and once again, I just focus on the hotel aspect, and Fred can 
probably answer the theme park portion of your question, 
Senator.
    Mr. Lounsberry. Yes. My real job is Senior VP of Sales for 
Universal Parks and Resorts, to Jonathan's comment.
    I think it really comes back to the international segment. 
Orlando, as a whole, had a pretty good summer, but it was 
really driven by local, state, close-drive market. All of the 
down turn, pretty much across the board, you would hear in 
central Florida and even south Florida, which is also dependent 
on international, has been the international segment.
    Senator Dorgan. Let me ask about the international issue. 
Prior to September 11, we had pretty robust tourism from 
international sources. We did that, I assume, without massive 
advertising. We did not have an organized effort. We certainly 
had no publicly funded effort with respect to that.
    But since September 11, you indicate that international 
travel is down. I was interested in the discussions where you 
described New York, Mr. Tisch. The international traveler 
apparently spends almost twice as much as the domestic traveler 
in New York. Tell me the cause of the drop in international 
travel. I believe I understand some of it, but tell me your 
perspective. What has caused it?
    Mr. Tisch. Senator, I think there are three reasons.
    One, there is still the lagging effect of September 11th. 
There are societal issues in many of the countries that send us 
visitors where they feel it is still not proper to visit 
specifically New York City, but the United States of America.
    You also have to keep in mind that many of the economies 
that send us our visitors are suffering themselves. If you look 
at Florida, we have a motel on Miami Beach, which did not have 
a particularly good summer, you have to fly into Miami Beach, 
and most of those people are coming from international 
destinations. Their economies are not very strong.
    And the third reason is one that we have all talked about, 
that countries we are competing with get travel and tourism. 
They are spending hundreds of millions of dollars to get 
visitors to come to them and not come to us. When you look at 
all the new travelers that might come out of Asia and when you 
look at all the new travelers that are coming out of Europe, 
now that the EU markets themselves as one particular 
destination, the competition is stiff. They get it and we do 
not.
    Senator Dorgan. I will come back to that in a moment.
    Let me ask a question about airlines. I believe some of you 
have referred to surveys that have been taken. Business travel 
is down. That is a significant part of the success of airlines, 
to have robust business travel.
    But it seems to me there are two other issues. One is the 
hassle. There is an increased hassle to fly with respect to all 
the security issues and so on. But the second is I assume there 
is some component of the flying public--at least constituents 
have told me this--who just do not want to fly. They are a 
little concerned.
    What percentage of the difficulty with respect to air 
travel comes from the downturn in business travel? What 
percentage do you think from surveys comes from just the 
hassle? And what percentage is represented by a group of people 
who decide just based on safety issues, watching an airplane 
run into a building, I do not want to fly anymore? Have any of 
you done any surveys that describe those issues?
    Mr. Tisch. Senator, the Travel Business Roundtable 
concluded a survey the second week in August to judge flyers 
and traveler sentiments a year after, and we found that safety 
and security has become sort of a minimal issue. People are 
resuming their normal traffic patterns and their normal travel 
patterns. Only 1 in 10 were very obsessed with safety and 
security. They feel that the airlines and the Government have 
done a pretty good job of dealing with the safety and security 
issues.
    What we did find is that the economy is the major deterrent 
to people traveling. When you combine that with, as we said, 
the hassle factor, it is creating enormous problems. It is not 
the fear of the airplane anymore. It is the fear of the 
airport. And people just do not want to deal with the problems 
that they may encounter or may not encounter. They just do not 
know. When you combine that with economic reasons not to 
travel, they are deciding to stay home. That is an enormous 
challenge for us to overcome as an industry.
    Senator Dorgan. Mr. Tisch, have you been selected for an 
enhanced inspection at some moment at an airport?
    Mr. Tisch. I have on the shuttle about 2 months ago.
    Senator Dorgan. Senator Fitzgerald, have you?
    Senator Fitzgerald. Yes.
    Senator Dorgan. They seem to be looking for me as I arrive.
    [Laughter.]
    Senator Dorgan. I get the double enhanced inspection I 
guess.
    Ms. McDowell and Mr. Durst, both of you I think described 
the fact that your resort areas and your State--the success of 
tourism there is more a function of people driving than flying, 
and you described a circumstance where those who have chosen 
not to fly and perhaps because of the economy are driving and 
taking vacations that are fewer miles away. It means that you 
have not seen the same downturn or the same difficulties that 
some other parts of the industry have experienced.
    As you project ahead now, we have a kind of a troubled 
economy, some say a weak economy. Some are worried about a 
double dip recession. We have got the intersection of a war on 
terrorism, the September 11 of last year, a stock market that 
has largely pancaked because of the deflation of the tech 
bubble, corporate scandals. We have a whole series of things 
that create uncertainty in the mind of the American consumer.
    In our economy, and especially it seems to me the tourism 
sector of our economy, is all about people's confidence. If 
they express confidence in the future, they do things that 
manifest the confidence: they buy a house, buy a car, take a 
trip, and so on. That becomes expansion. If they feel not very 
confident, not good about the future, then they do it exactly 
the opposite. They defer the purchase of the car, the trip, the 
vacation, and so on.
    As you look at the future, and plan for the future in 
Branson, for example, or through your tourism efforts in your 
State, what are you expecting? And let us assume nothing 
happens here in public policy. You all have given us some ideas 
and thoughts. But let us assume nothing happens here with 
respect to public policy. What do you expect to happen in 
Branson and also in the State of South Carolina with respect to 
the next couple of years?
    Ms. McDowell. All of the issues that you described are of 
grave concern to Branson, Missouri. Even though we do not 
depend on international travel and we do not depend on business 
travel, we depend heavily on senior citizens and adult couples 
who may have a limited income. In addition to travel being 
influenced by confidence, it is greatly influenced by 
disposable income. It is not something that anyone has to do. 
Therefore, when returns in the stock market and other 
investments are on the decline, 50 percent of our visitor base 
is at significant risk for not coming to Branson. Even though 
we are perceived as a value destination, we are still a luxury 
in terms of what are the necessities of life and what are not. 
Therefore, all of that can have tremendous impact on us and 
especially our senior visitors.
    Senator Dorgan. The notion that the average retirement 
account has diminished by perhaps a third or close to a third, 
that gives people the feeling that maybe we ought to defer this 
travel. That would especially affect your type of resort, would 
it not?
    Ms. McDowell. Yes, it definitely would and we have seen 
that in the past with economic downturns of that sort.
    Senator Dorgan. Mr. Durst?
    Mr. Durst. Thank you, Mr. Chairman. In the aftermath of 
September 11, one of the first things that we did was to put 
together a consortium of some of our sister States in the south 
to do some pretty extensive ongoing research to try and find 
out exactly what the travelers' attitudes were and then from 
that to tailor our marketing program. You absolutely are right 
on the mark with regard to what those surveys were pointing 
out, as was Mr. Tisch.
    The thing that we see, sir, down the road is that--no pun 
intended--States such as ours, which are a drive destination, 
are going to be holding their own so long as they are 
strategically using their marketing dollars to try to bring the 
folks in that are within, like in our case, a two tanks-full of 
gas or so drive away.
    Plus, of course, you need to have the tourism product that 
you are putting forth to the folks and making sure that you are 
connecting with them. Family values was mentioned, and that is 
one major component of our advertising message, talking about 
our beaches, talking about our golf, talking about the family 
type experience.
    But I think, respectfully, that areas such as ours are 
going to be holding their own. We have not begun any kind of 
campaign saying, if you come to South Carolina on the way down 
to Florida and stop and stay there instead of going to Florida, 
that you will save two days' worth of vacation by going on our 
beaches as opposed to going to Universal. We would not want to 
dare do anything like that.
    [Laughter.]
    Mr. Durst. But we do know, sir, with respect to our sister 
States in the south that we feel cautiously optimistic that we 
will be able to hold our own by going toward that drive market.
    But going back to an earlier question that you had posed, 
the folks that come into South Carolina by car have gone up 10 
percent in the aftermath of September 11, which is no surprise. 
But therefore, we are playing to our strength in going after 
that market.
    Senator Dorgan. Let me just ask one additional question. 
Mr. Rosenbluth, I have taken a look at the white paper, you 
were kind enough to send to me. I think it is a fascinating 
description of some of the issues the airlines need to be 
concerned about. We did not have an airline representative on 
this panel because they have been to Capitol Hill in the last 
couple of weeks and have testified with respect to their 
segment. But I agree with all of you that it is a very, very 
important segment of the travel and tourism industry because we 
just must have a healthy, vibrant commercial air travel system 
in this country. Those are the companies that haul passengers 
to your hotels and resorts and destinations.
    But I guess I would ask the question, Mr. Rosenbluth, have 
you shared your white paper with the airlines and what is their 
reaction?
    Mr. Rosenbluth. I have had a discussion or two with the 
airline executives. For the most part, I am not sure they 
understand it. I also believe at the same time that they are 
about to capitulate and do something radical because they need 
to. Airlines are risk-averse, and yet something radical needs 
to change. I am not certain that the most senior officers of 
airlines have heard from those that are at lower levels exactly 
what the problem is because there has been such a fight for 
share out there that they have gone after share and, as a 
result, have lost billions of dollars. This goes back far 
before September 11th. It has been going on for a number of 
years now, but it is going to stop.
    What I am afraid of is that the airlines will do something 
arbitrary in nature and just stop corporate discounting 
completely as opposed to doing it in a rational way where, like 
any other business, you get a discount in return for giving 
something back or for buying something in bulk or for getting 
market share. But by allowing people to just get these prices, 
then not getting anything back in return, the airlines have 
severely shot themselves in the foot.
    Senator Dorgan. Mr. Rosenbluth, thank you very much. This 
testimony has been very helpful and instructive and Senator 
Fitzgerald and I will, along with our colleagues, evaluate it 
and try and develop some suggestions, working with you, Mr. 
Tisch, with the Travel Business Roundtable, and Mr. Lounsberry, 
with the Travel Industry Association. We would invite you, 
because this Subcommittee has some jurisdiction here, as we 
move along, periodically to send us information. Do not wait 
for a hearing. If there are things you think that we should 
know that is happening in your industry, we want you send it to 
us and have the advantage of that.
    We know that you have come from some distance here today to 
testify and we very much appreciate your testimony.
    Senator Fitzgerald. If I could just say I really encourage 
all of you to get involved as the airlines come forward with 
another bailout package for themselves. They are looking out 
for themselves. They are not necessarily looking out for the 
rest of you. They are very accustomed to getting benefits from 
the government. As a regulated industry, their CEO's are out in 
Washington regularly. I see CEO's from the airlines more than I 
see most CEO's from Chicago. They are out here all the time. 
They are getting very used to surviving by virtue of special 
laws put into effect for them, such as in the case of last 
year--a bailout.
    The bailout bill is probably going to move quickly. The 
bill bailing them out moved more quickly than any bill that I 
have seen in the 4 years I have served in the United States 
Senate. The airlines have awesome power on Capitol Hill. I 
think that is unfortunate because I do not think we have 
necessarily helped the general public by helping them.
    But I encourage you to be very active and aggressive in 
getting your voices heard so that you are just not left out of 
whatever the airlines are on the verge of getting. That would 
just be my words of advice to you. I will try to be there, 
speaking for all the others, but you need to come here 
yourselves too. I am glad you all were able to appear today.
    Senator Dorgan. Let me just say that I personally think 
that we should consider some initiatives and some incentives. 
It was not too long ago that we had actually a significant part 
of the Commerce Department with an assistant secretary who was 
working full time and concerned about these issues, and that 
was abolished.
    I think there are a number of suggestions you make today. 
Some are incremental suggestions to begin from one direction. 
The others come from the other direction, but they aim at the 
same spot, and that is try to increase the interest that people 
around the world have in this country as a destination for 
travel and tourism. I do think that it is a big, big, 
significant industry in our country. And I do not think all of 
this happens by accident. If you watch the way other countries 
in the world promote themselves and try to promote and 
aggressively achieve the currency that is spent for travel and 
tourism, they do that because it works. In our country it would 
be well advised to understand that sitting back and doing 
nothing in competition means that you lose the competition.
    So you have offered a good number of ideas today and we 
will certainly consider them. We think they are very useful.
    Now, Mr. Fitzgerald used to be Chairman of this 
Subcommittee, and he has taken the gavel.
    Senator Fitzgerald. I hope to be again some day.
    [Laughter.]
    Senator Dorgan. If he will provide the gavel, we will 
adjourn the Subcommittee before he is Chairman once again.
    [Laughter.]
    Senator Dorgan. Before we get into a long discussion of 
that, we will be adjourned.
    [Whereupon, at 3:59 p.m., the Subcommittee was adjourned.]

                            A P P E N D I X

    Prepared Statement of Samuel H. Wright, Senior Vice President, 
               Government Relations, Cendant Corporation

    Cendant Corporation (``Cendant'') appreciates the opportunity to 
submit this statement to the Committee and respectfully requests that 
this statement be included in the official record of the hearing.
    Cendant Corporation is a diversified global provider of business 
and consumer services within the hospitality, real estate, vehicle, 
financial and travel sectors. Cendant's hospitality division is the 
world's leading franchisor of hotels through ownership of brand names 
that include Ramada, Days Inn, Howard Johnson, Travelodge, Knights Inn, 
Super 8 Motel, Wingate Inn, Villager Lodge/Premier and AmeriHost, a 
leading operator of branded time share resorts (Fairfield) and the 
world's leading time share exchange service (RCI).
    Cendant provides global ticket distribution services to the travel 
industry through its Galileo and Wizcom operations as well as its on-
line (Trip.com and Cheaptickets.com) and off-line (Cendant and Cheap 
Tickets) travel agencies.
    As indicated during the hearing, the travel and tourism industry is 
a huge segment of the domestic economy that generates more than $582 
billion in revenue each year and employs directly and indirectly more 
than 18 million people. There is no doubt that the events of September 
11th continue to have a negative impact on our industry. One year later 
we continue to struggle to overcome the external challenges facing our 
industry.
    I would like to clarify two points raised during the hearing: the 
financial recovery of moderately priced hotels and the impact that 
Orbitz has on travel agents. It was suggested that moderately priced 
hotels/motels although adversely affected have bounced back 
financially. This is a misconception. The entire lodging industry is 
being hit harder than expected. Business travel has not recovered as 
expected, so the industry has been more dependent on leisure travelers 
staying at moderately priced hotels/motels. Leisure customers are 
reserving trips with shorter leads times, forcing hotels/motels to 
continue discounting room rates. As a result, consumers continue to 
postpone reservations, knowing that rates are low and the discounting 
ultimately ceases to have an incremental effect. Consider the following 
statistics released by PricewaterhouseCoopers Lodging Practice, 
entitled U.S. Lodging Industry Forecast:

   Revenue per available room, a standard measure of hotel-room 
        prices and occupancies, is now expected to decline 2.3 percent 
        this year, down from a previous estimate of 0.7 percent.

   For 2003, revenue per available room is expected to rise 
        only 3.5 percent, instead of a previously forecast 5 percent. 
        Not until 2004 is such revenue expected to increase at a more 
        robust 5.6 percent pace.

   This year's occupancy levels of 59.5 percent are the lowest, 
        except for six years during other recessions, in the past 75 
        years. Consecutive decreases in room rates last year and this 
        year are the first since the Great Depression, when rates 
        declined from 1930 to 1933.

   PricewaterhouseCoopers estimates that the average daily 
        hotel-room prices will decline 1.4 percent this year, compared 
        with previous estimates of a 0.3 percent decrease. Occupancy is 
        expected to faIl 0.5 percent to 59.5 percent, instead of 0.3 
        percent, as previously projected.

    The second point of clarification, is in response to a question at 
the hearing from Senator Fitzgerald concerning the impact that Orbitz 
has on travel agents. Orbitz is the online travel services joint 
venture owned by the nation's five largest airlines (American, 
Continental, Delta, Northwest and United). Orbitz is structured by its 
airline owners to provide Orbitz with exclusive access to the lowest 
priced fares offered by the airlines (so called ``web fares''). This 
structure eliminates competition among other online and bricks and 
mortar travel agents for webfares, which, in turn, harms the traveling 
public. Please consider the following:

   The owners of Orbitz operate nearly 80 percent of all 
        domestic air travel.

   Orbitz is one of the highest cost distribution systems 
        available for selling passenger tickets.

   Orbitz' owners have eliminated commissions to all 
        independent travel agents, while the owners continue to pay 
        guaranteed transaction fees to Orbitz. Meanwhile, Orbitz, on 
        behalf of its owners, has assessed service fees to consumers, 
        which will likely increase as Orbitz forces other independent 
        distributors to exit the market.

   By restricting access to critical fares and inventory, the 
        Orbitz exclusivity provisions threaten all independent travel 
        distributors as well as the millions of consumers they serve.

    The Subcommittee needs to address the current plight of all hotels/
motels and the negative impact of Orbitz on travel agents as it 
considers measures to assist the nation's travel and tourism industry.
    Respectfully submitted,
    Samuel H. Wright

                                  
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